Helping employees navigate retirement planning in times of high inflation

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With the United States already in the midst of a retirement savings crisis (according to the Federal Reserve Board, only 36% of non-retirees think their retirement savings are on track), the current period of high inflation is making a difficult situation even more difficult for many people. In reality, 21% of Americans have reduced their retirement savings because of inflation and a quarter of Americans will have to delay their retirement, according to the most recent BMO Real Financial Progress Index.

Worries about the impact of high inflation on their retirement savings or even delayed retirement can create additional pressures for workers at a time when many are already feeling stressed. In fact, a recent investigation American adults commissioned by the American Psychological Association found that the main source of stress was “the rise in the price of everyday objects due to inflation,” cited by 87% of respondents.

Start with the basics

How can employers help? First and foremost, by offering a retirement savings benefit if they are not already doing so. There are more affordable options than ever for businesses of any size to provide a retirement savings plan, which has become a necessity for recruitment and retention. A recent Paychex survey of US employees found that 62% of respondents identified pension plans as one of their top three benefits offerings that would make them more likely to stay with their organization long term.

Employers who offer a retirement savings benefit should review all HR benefits and policies, with a view to making any adjustments or additions that can help employees save money, which they could potentially put into a retirement savings account. These changes could include higher than expected salary increases, a work-from-home option to reduce transportation costs, a higher percentage of company contribution to employee pension plans or new health benefit options. .

Employers can also offer support by offering financial wellness and planning programs from an outside resource. To make sure the content matches employees’ needs and interests, it’s a good idea to regularly poll them on the financial planning topics and questions they most want to know about. When it comes to managing high inflation, finance and benefits experts can provide information and insights to help employees make the best budgeting and planning decisions, balancing the need for short term to save money with the long-term need to save for retirement. .

Guiding employees through the storm

During a period of high inflation, employees may very well be tempted to reallocate the money they have saved for retirement to pay for immediate expenses. This approach, however, should be avoided where possible. Instead, encourage employees to:

  • Stay the course, rather than waiting for the end of inflation; slowing down or stopping contributions to retirement savings can derail established retirement planning strategies and timelines.
  • Be aware of the ebbs and flows of inflation, which often happens so slowly that people forget that their cost of living in retirement will be much higher than they estimate while they are working. Fortunately, with the current high rate of inflation, more people are aware of the impact inflation will have on future costs and savings.
  • Plan responsibly, as a means of creating security and being able to maintain current living standards in the future.

With inflation reaching levels not seen in 40 years, many people are in uncharted waters as they consider their retirement savings strategy. Employers can help by providing information, resources, benefits and support that enable their employees to make retirement planning decisions that are tailored to their unique circumstances.

Michael Majors is the Vice President of Human Resource Services (HRS) Sales at Payment.

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