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Why Is Financial Wellness Important In A Retirement Plan?


Financial wellness programs can be helpful to plan participants as well as an asset to the company. What is a financial wellness program and why is it important?   


Welcome back to Five Minute Fiduciary. If this is your first time joining our weekly production, we have one goal, to provide good content to fiduciaries of 401k plans in five minutes or less once a week.

A couple of weeks ago, I went clay pigeon shooting with some friends. If you've ever gotten clay pigeon shooting, what you do is you launch an orange disk into the air and you have to follow it and shoot it with a shotgun. This requires marksmanship and skill. Since you have to follow a moving target, you have to be able to adjust to the target. Also, the longer you wait, the harder it is to hit that target.

This is a very similar concept to retirement planning. A retirement plan is a moving target that requires adjustments to be made. In my experience, people are pretty private about their finances. Because retirement is a moving target that people are pretty private about, it can give people a lot of anxiety. In their retirement plan space, one of the trends is a focus on financial wellness.

Now, this is how I look at financial wellness. Having your financial life in order can bring confidence. An employee who has his or her financial life in order is probably going to be more productive and more focused on their work. Also, no matter how much you love your employees, there will be a day when they will no longer be working for the company. So, what are employees doing today, to make sure that that transition from employment to retirement is a smooth transition, a transition that they're confident about.

When you think about it this way, having a retirement plan for the company is a step in the right direction. Having a good participation rate in the 401k plan is even better. But the way to take it to the next level, is providing resources and education to help people make good decisions now, that will affect them and their future in retirement.

A great place to start is to look at the resources you already have a lot of record keepers have tools to help you see what the overall retirement readiness of the plan looks like. They also often have a lot of resources to provide the education that will help your employees make good decisions.

The second thing is to rely on your financial advisor. If your financial advisor is not proactively helping you out in this regard, it may be a great time to look and see if there may be a better fit for you and your company. I hope this is helpful and insightful as you look at your own plan. If you'd like to utilize our second opinion service or just have questions, feel free to reach out to us. This is not intended to be tax or legal advice. If you need tax or legal advice reach out to appropriate professionals.

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