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Workers illiterate about everyday finances

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SAN DIEGO — We talk a lot about the retirement crisis in this country: whether it’s in the form of underfunded pensions or 401(k)s.

But financial illiteracy poses as great a threat to a workforce that increasingly barely knows how to save, let alone retire. That was the problem panelists tackled in one of the last sesssions of the day here at NAPA’s annual 401(k) Summit.

Consider: 60 percent of employees have no rainy-day fund whatsoever. And of those who do, 46 percent of them have less than $10,000 in savings. Collectively, we’re a nation working under $1.2 trillion in student loan debt. Finally, the average household credit card debt is $15,279.

But it’s little wonder. Today, only 17 states offer financial literacy education in their public school systems.

Panelist Jania Stout, practice leader and co-founder of Fiduciary Plan Advisers, Hightower, said, “Low balances in a retirement plan is a symptom of a bigger problem.”

Few argue it’s a problem, but as the session audience revealed in a live poll, opinion remains split down the middle as to whether advisors can do anything about it, or if they even have the tools to do so.

As moderator Deborah Rubin, SVP-TPA and Specialist Advisor Distribution, Transamerica Retirement Solutions, pointed out, “Advisors aren’t educators. We also don’t have the time or the resources” to tackle financial literacy head on.

But that’s no excuse. Stout’s been doing it for a few years now, and her experience with regular, short lunchtime web seminars for employees has been having a visible impact with her employer clients.

“It works better online rather than in person,” she explained. “No one — especially managers – wants to come in and talk about their debt.”

Stout also discussed hiring recent college graduate to work as dedicated financial educators, an investment that pays off for her clients, her practice, and the new graduates who might have trouble finding employment elsewhere in the business.

Finally, Stout explained that she’s looked at outsourcing that education altogether to a third-party, where she insists it can be written off as a plan expense.

“Employees say, ‘You literally saved my life.’ But if we can help fix their debt issues, they can then help save for retirement,” she said. “Finally, it also helps immensely with employee retention.”

As moderator Rubin pointed out, “There’s a reason employees opt out of retirement plans. They’re opting out because they simply don’t know what they’re doing.”

Bu as an audience member pointed out, that education not only has to be simple, it also has to be consistent and constant, forcing a cultural shift in today’s employees.