By Pyc Fitness
©2004-2008
Hundreds of organizations are putting together plans for the last week of February 2008 to help employees test themselves for financial fitness.
Programs will range from increasing understanding of credit scores and alternative types of mortgages, to basic savings tests and retirement planning. Employers should have workers focus on doing an review of emergency savings, credit use, 401(k) participation and contribution rates, how their money is invested and other savings goals.
Are your employees aware of all of the programs that make it easier to save for kids' college educations? Are they aware of the newest programs that make it easier to save for health expenses while working and for retirement?
Are your older workers aware of what Medicare does and does not pay for, and what their premiums will be? Are they aware of how much they will need to save just for health insurance in retirement if they live to 100?
Or how much they need in their 401(k) plans to be financially fit until 100? Or the difference between "life expectancy" (the point at which you have a 50 percent chance of still being alive) and "how long you might actually live" (some of us will still be here at 108!)?
Recent reports indicate that more and more employers are changing their 401(k) plans to provide for "automatic" default actions on participation, contributions and asset allocation, but that does not decrease the need for employees to know financial basics if they are to be financially comfortable during their lifetimes.
Consider some sad but true facts.
More than half of 401(k) participants do not know the difference between a stock and a bond. More than 60 percent of adults say they have never had a budget, and between 22 percent and 45 percent -- depending upon the survey -- say that they live paycheck to paycheck with no cash reserve. More than two-thirds say they have less than a three-month cash reserve.
More than one-quarter (28 percent) of baby boomers have less than $10,000 in total savings and investments outside of their primary residence, and only 5 percent have more than $1 million. Now, $1 million may sound like a lot, but the value of Social Security and Medicare to a couple retiring today with total final income of $42,000 and living to "life expectancy" (meaning 81 for men and 85 for women) is nearly $900,000.
For maximum-wage earners, it is more than double that value, and last year 6 percent of workers had income above the wage cap.
Do your employees understand how much Social Security and Medicare are actually worth? Or how much they will rely upon those government programs, like it or not, due to their saving patterns both in and out of their 401(k) plans?
That is what America Saves Week is all about.
It begins a process of facilitating a regular employee financial-fitness reviews. Employers can sponsor a series of financial fairs with their service providers. Prior to the week, promote the events with a series of financial education e-mails, and then follow that week for the next 51 weeks with tips and e-mails offering basic financial facts and tools.
The future of a consumer-driven economy depends upon a financially fit consumer, and as the over-65 population grows from 13 percent to 22 percent of the nation, it depends upon financially fit older workers and retirees.
This is not just about 401(k)s, this is about the nation's future.