Retirement plan advisors don’t typically spend the majority of their time focusing on taxes for their clients or participants. But as every advisor knows, there are interrelated decisions around taxes that can significantly impact a participant’s retirement and the economics of the plan sponsor.
The issue we face as an industry is education – and the role a plan sponsor plays in helping participants make informed decisions on their taxes today so that they maximize their retirement. Similarly, retirement plan advisors can educate plan sponsors on the economic impact of retirement plans, well prepared participants, and conversely ill-prepared participants.
There’s a growing trend in the industry and quite a few conversations happening at the Department of Labor about how plan sponsors can help participants become better consumers of retirement plan benefits. Plan sponsors who commit to educating their people stand to benefit from retirement preparedness in the long run, but finding the right cocktail of education and motivation has proven to be tricky.
In the past 20 years we’ve seen traditional seminar programs or “lunch and learn” offerings that have never truly been successful at making the impact toward higher financial literacy. Why? Because though a participant may find a 40-minute session with an advisor in the company’s cafeteria helpful, there’s no real follow up. No relationship. No motivation to act or plan. Employees attend, discuss their taxes, their 401(k), their mortgages, etc., and then walk back to their desk where life takes over again.
Any advisor who works with a business, small or large, would agree that reaching every employee in a way that resonates with their individual situation is daunting. This is where today’s financial wellness programs thrive.
Financial Wellness and Taxes
Financial wellness refers to educational programs that are aimed at making participants literate, though not experts, on their financial picture so that they can make informed decisions about their investments and retirement plan options.