Why You Are Afraid Of Saving For Retirement And How To Get Over It

A recent study shows more than half of Americans are behind in retirement savings. Here's how to motivate your employees to catch up.

Here’s a scary thought: What happens if you outlive your retirement savings? Forget exotic vacations, even early bird specials would be out of reach in your golden years.

According to a December 2013 study by financial services provider Fidelity Investments, 55% of the 2,200 Americans surveyed have insufficient savings to cover essential living expenses (housing, health care, and food) in retirement.

Kyle Oppenhuizen, a reporter for the Business Record, examined some of the reasons why Americans aren’t saving, and suggests it comes down to fear. Most people don’t know how much money they’ll need for retirement and have a difficult time caring about their future self, he says. He spoke with several financial experts who offered tips to employers for how to motivate their employees. Here’s what they suggest:

1. Consider auto-enrollment.

According to Jerry Patterson, senior vice president of retirement investor services for Des Moines, Iowa-based Principal Financial Group, only 40% of employees will enroll in a company’s retirement plan on their own once they become eligible. If employees are automatically enrolled, however, less than 10% will opt out, he says.

2. Offer to match employee contributions.

Brian Hood, co-founder of Des Moines, Iowa-based Legacy Financial Group, suggests employers match employee contributions to their 401(k) plan. “Everybody will do their best to put in at least the minimum to get the maximum,” Hood tells the Business Record.

3. Steer clear of scare tactics.

Chances are, if someone’s behind in their retirement planning, they already know they’re behind, Oppenhuizen says. Instead of using numbers to discourage them, Hood suggests encouraging employees to think realistically about what they’re going to need or want out of retirement. “The retirement planning industry has painted a picture of playing golf and taking a lot of vacations…Sometimes the battle is to get people to realize what they really need, or don’t need, to be happy in retirement,” Oppenhuizen writes.

Depending on when someone comes to the realization they aren’t financially ready for retirement, it can be overwhelming. Joel Duncan, CEO of Des Moines, Iowa-based Merit Resources, a professional employer organization handling human resources and payroll for companies, tells Business Record it’s important to meet people where they are right now. If they haven’t started saving for retirement yet, encourage them to start. “End of the world, or those kinds of threats, we have not found in our practice here to be encouraging. It’s encouraging to say, ‘Take the first step,’” he says.

Hat tip: Business Record, Fidelity Investments

[Image: Flickr user r. nial bradshaw]

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  • The key is to start saving/investing early in life, be consistent, take advantage of any employer matching plan, max out contributions when possible, eliminate debt, avoid risks with your nest egg and plan for multiple streams of income once retired (social security, pensions, dividends, part time work, etc.). The site Retirement And Good Living provides information on this and other financial issues, health, retirement locations, part time work and also has a great blog of guest posts from around the globe about a variety of retirement topics.