Retirement planning is an important task for HR teams in organizations. Broadly speaking, retirement planning is a process through which organizations offer necessary options to their employees to retire financially secure, so that they can live comfortably in your golden years. However, the exact path an employee takes will depend specifically on their independent retirement goals and financial situation.
Why Is Retirement Planning So Important?
Retirement planning helps your employees invest for their future financial security when the employee will not be working. Hence, the planning phase is an essential factor to action their post-working life.
Employee retirals need proper planning
While most employees want the freedom to retire one day, many don’t actively plan for it to happen smoothly. Here’s where HR teams need to intervene to ensure employees take steps for a secure retirement, so that the employee has financial resources to live off of once they stop working.
Employees can stay retired and not forced to work as senior citizens
Many seniors return to work after retiring. In some cases, this is simply because they want to. They are accustomed to working and having little to do in retirement makes them seek purpose through work once again.
However, many retirees are forced to go back to work out of necessity. Sometimes, their retirement benefits are not enough, and at other times, their family situation may compel them to work to help children or grandchildren with college expenses, or similar reasons.
HR teams can help employees to plan effectively to reduce the likelihood or their senior employees being forced to return to work.
Retirement Planning Helps Employees Save Tax
It’s a known fact that most employees struggle with saving taxes. Organizations that help employees with retirement planning also benefit in terms of corporate taxes. Organizations can hold financial education programs for employees to create awareness about retirment planning and interface employees with financial advisers.
Prepare Employees for Retirment Expenses
It’s a sad fact, but it’s true: bills keep coming even when there is no income. Just because your employees retire doesn’t mean their living expenses stop. In fact, they might increase due to additional healthcare needs and more. Having a retirement plan for employees helps them work out their living expenses.
( Also Read: The Ultimate Guide on Employee Attrition )
When to Start Retirement Planning for Employees
There is a common misconception among young employees, and it often sounds something like, “I have plenty of time to prepare for retirement. There’s no need to rush.” Others think, “As soon as I get my finances sorted, I’ll start thinking about retirement.”
Unfortunately, these thoughts can result in an unhappy retirement. Retirement planning for employees should start with inclucating the below two foundational concepts in them:
1. If you wait for the “perfect” or “right” time, you’ll never start.
2. The earlier you get started, the better. However, it’s never too late to start.
With these two concepts in mind, employees can be encouraged to plan for retirement immediately. Neither their age nor their current finances should come in the way of retirement planning.
Factors to Consider for Employees’ Retirement Planning
As you begin to task HR teams with retirement planning for employees, there are some important factors to consider. While organizations can have HR teams help employees, it’s best to have them work with a financial planner to achieve the best results.
A very important factor in employee retirement planning is what are their financial goals once they retire. Do they wish to travel, work on their hobbies as a business or work with non-profits? Employees should be asked to write down their goals and the cost estimates of each.
Timelines to Achieve Retirment Goals
Timelines will help set the trajectory for the actions to take and the retirement products that can achieve within those timelines. Having a primary date and a secondary datecan help if retirement planning is being done late in life. Having a secondary date gives you a little extra time to prepare if necessary.
Employee Needs Post Retirement
Organizations need to make employees aware that they need to decide the amount of money needed for regular living expenses. These include rent or mortgage, utilities, insurance, and so on. If the employee plans to move to another state or country, they need to factor in the cost of living in that location. Besides this, they need to ensure they have emergency expenses, home maintenance, other such expenses factored in.
Investment Options for Employees
There are many retirement options available, including employer-sponsored retirement plans, pension plans, and others such. You can also consider stock options according to your retirement timeline. If the employee is starting at a young age they can take riskier options with better returns. Helping employees choose the best option or mix of options where a financial planner can be very beneficial.
For organizations, retirement planning for employees is essential to motivate and help them be set on the savings path. Make it a priority and make HR teams work on it as soon as possible.