Retirement Readiness: A Marathon, Not a Sprint

August 29th, 2018
by Jonathan Leidy

RPM Q3 2018_Pulse Image_Blog Article 2_The Financial Marathon

Training for the Financial Marathon

For many people, their ultimate financial goal is to reach a comfortable retirement with enough reserves to enjoy it. In many ways, achieving Retirement Readiness is just like running a marathon; it’s a long-term undertaking that takes loads of preparation and persistence.

As the sponsor of your company’s retirement plan, you play a crucial role in helping your employees reach these long-term financial goals. Imagine yourself as a trainer; you are there to build a training regimen that enhances your employees’ ability to achieve their goals and keeps them motivated along the way.

Setting Attainable Goals

A good trainer will assess their athlete’s health and ability before committing to a race. It is important to align goals and position your employees for success. If they’re not yet ready to run a marathon, that’s fine. They may need to start with the financial equivalent of a 5K or 10K instead.

If retirement is not your employees’ most pressing financial concern, consider offering a financial wellness program, like those available through Portico, in order to help your employees address the following:

  • Emergency Savings
  • Student Loans
  • Credit Card Debt
  • Healthcare Costs

Inadequate emergency savings is a very common concern for employees, especially in the SF Bay Area. Many have little to no money in savings: 45% report having less than $25,000 saved, and 26% report having less than $1,000![1]

Even worse… what about that dreaded anti-savings? Three out of five employees consistently carry balances on their credit cards, and 40% of those folks are finding it extremely difficult to make their minimum payments on time each month. This kind of debt is extremely common for Millennials and Gen Xers.

And there’s certainly no shortage of student loan debt either. In fact, the Federal Reserve reported $1.4 trillion in student borrowing as of the end of 2017.[2] This is a huge concern for younger employees. Eight out of ten Millennials that carry student loan(s) say that it has a moderate to significant impact on their ability to meet their other financial goals.[3]

Healthcare is one of the largest expenses in retirement. A vast majority of workers (81%) haven’t even tried to calculate how much money they would need to cover healthcare costs in retirement.[4] As it turns out, the average couple will need a staggering $280,000 for medical expenses in retirement, excluding long-term care.[5]

Anticipate Obstacles

Talk to any marathon runner and they can tell you all about the walls that loom during a race. For some, that wall might be a soul-crushing hill; for others, it’s the 13.1 split; still others may experience injuries that make them question whether or not they can push themselves to reach the finish line.

The same is true for your employees. Even if they are in the process of saving for retirement, encountering one or more financial obstacles along the way can force them to take out loans or Hardship Withdrawals from their 401(k) plans. 44% of employees think it’s likely they’ll need to take money out of their retirement plans to pay medical bills, credit cards, education expenses, or unexpected costs. 3

401(k) loans can be a drag on participants’ performance when running the Financial Marathon. One option is to consider tightening the loan and hardship provisions of your plan to deter employees from using their nest egg as a rainy-day fund.

The Real Trick

Athletes and trainers alike are happy to offer tips and tricks to make finishing a marathon easier, from rubbing Vaseline on your feet to purchasing fancy supplements. But at the end of the day, the only way you can finish the race is if you start running in the first place.

As a plan sponsor, make sure that your 401(k) enrollment process is simple and designed in the best interests of your employees. Take steps to ensure that your employees will have proper support along their path in the form of education, advice and Financial Wellness. And help your people develop solid savings habits through the help of auto-enrollment, auto-escalation and other helpful elements of plan design.

At Portico, we are passionate about seeing our clients achieve their financial goals and can work with you to build a plan that will keep your employees on pace to retire.

[1] Helman, Ruth. “2018 EBRI/Greenwald Retirement Confidence Survey” April 2018.

[2] US Federal Reserve. “Consumer Credit- G.19.” April 6, 2018.

[3] PricewaterhouseCoopers LLP. “Employee Financial Wellness Survey” (2018): PWC. May 2018.

[4] Helman, Ruth. “2018 EBRI/Greenwald Retirement Confidence Survey” April 2018.

[5] Fidelity Viewpoints “How to plan for rising health care costs.” April 18, 2018.