The Pew Trusts recently issued a report showing Indiana has the seventh best participation among employees eligible for employer-sponsored plans of 50 states. Indiana is also in the top twenty in providing access to plans by employers.
Comparatively, Hoosiers are near the top in participation but there is still room to go. In Indiana, 63% of workers have access to an employer-sponsored retirement plan and of these employees, only 57% participate.
Thirty-seven percent of employees in Indiana do not have access to a retirement plan. If you, as an employer, don’t offer a retirement plan, 100% of your employees may have to rely on social security for their sole retirement benefit.
In 2015, the average social security benefit for all retired workers in the United States was $15,936 per year. If the 43% of your employees who are not participating in the retirement plan are planning on being supported solely by social security in retirement, they would be living on less than minimum wage.
If employees cannot retire because of lack of savings and instead continue working, what are the long term costs to employers? Some things to consider might be higher wage costs, higher medical and long term disability costs, to name a few. A recent report from Mercer says, “If 4% of your population is retirement eligible and half of those people choose to delay retirement, 10% of your employee population would experience promotion blockage.” This suggests that for each workers delay in retirement can insight five or more promotion delays.
As Hoosier employers, here is what you can do to improve retirement savings:
- If you do not have a plan, consider sponsoring a plan.
- If you do have a plan, encourage participation and realistic savings rates. You can do this by implementing changes in the administration of your plan to automate participation and deferral increases, essentially putting these choices on autopilot for your employees.
Great job, Indiana on being one of the leaders in the country with retirement plan participation. Now is the time to get to work on helping more employees save for retirement. – Indiana a State that Works.
Douglas G. Prince is CEO and a principal at ProCourse Fiduciary Advisors, LLC.