Author Topic: How can I best help my employees start saving for retirement?  (Read 3288 times)

frenchlentils

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How can I best help my employees start saving for retirement?
« on: December 08, 2015, 05:54:56 PM »
Ciao! I run a small nonprofit with 10 employees. I started the organization five years ago and we have grown steadily since then. We have always offered great health insurance (I used to live in Europe and have a weakness for good health coverage), but do not have a 401k or 403b as of now. Most of my employees are young, and most come from low-income and/or immigrant families. Many of them help support their families financially to some extent. I would love to help them start saving for retirement, but want to do it in the most efficient way possible for both the organization and my employees. Any small business owners or ideally nonprofit folks out there with advice on what to do to be the most helpful? Creative ideas especially welcome! Thanks!

unno2002

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Re: How can I best help my employees start saving for retirement?
« Reply #1 on: December 08, 2015, 06:07:00 PM »
Consider:

    Education.  Many/most people do not understand investing.
    401k.  Even without any employer match, it can be a great deal for employees, IF a good custodian is selected that provides a broad choice of investment options.  While Iím not that excited about just securities, if I went back into business I would consider a 401k account thru a place like Charles Schwab, where the employees could have a very broad selection, vs a typical one company, or something so limited as the five options in the federal Thrift Savings Plan.

Paul der Krake

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Re: How can I best help my employees start saving for retirement?
« Reply #2 on: December 08, 2015, 06:09:02 PM »
Look into SIMPLE IRAs. Very cheap to administer, some flexibility as to how you match contributions.

I am not sure how they compare to 403(b), but they are significantly cheaper than running a 401(k). Yes you can only contribute $12k/year instead of $18k/year, but it doesn't sound like your workforce has the means to sock away that much anyway.

newton

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Re: How can I best help my employees start saving for retirement?
« Reply #3 on: December 08, 2015, 06:59:42 PM »
I agree.  Educate them.  Our company offers a 401K with a solid 3% match.  I am still always amazed at how many employees don't take advantage but I really believe it is because they don't understand. 

Physicsteacher

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Re: How can I best help my employees start saving for retirement?
« Reply #4 on: December 08, 2015, 08:19:27 PM »
I would suggest you look into the MyRA Roth IRA program offered by the federal government and encourage your employees to sign up. It will offer your employees a simple way to start saving for retirement that won't cost your organization anything or require any actions on your part other than setting up the payroll deductions. They'll earn a decent interest rate and can eventually roll the account into a Roth at another provider when they've amassed significant savings and, one hopes, had time to learn more about investing.

Dollar Slice

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Re: How can I best help my employees start saving for retirement?
« Reply #5 on: December 08, 2015, 08:38:46 PM »
My first FT employer (I was 22) had a profit-sharing plan that was totally hands-off for the employees. (In spite of the name I think a non-profit can do this too.) If the employer is genuinely looking to help younger and less-educated employees it can be pretty fabulous - basically the company just deposits money into the account for the employee without requiring them to give up part of their paycheck. I never really knew much about it but by the time I rolled it over into a 401k there was about $30k in it.

I'm not sure about admin costs compared to SIMPLE IRA and 401k, though.

And the downside is that they might not really learn any good saving habits from it. But the upside is that even the ones who don't make great decisions will end up with a retirement fund, and they probably will need it the most.

smalllife

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Re: How can I best help my employees start saving for retirement?
« Reply #6 on: December 09, 2015, 05:17:05 AM »
Whatever type of plan, fight having a waiting period - it discourages use, and try to have it be opt out rather than opt in.

StetsTerhune

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Re: How can I best help my employees start saving for retirement?
« Reply #7 on: December 09, 2015, 07:10:15 AM »
My first FT employer (I was 22) had a profit-sharing plan that was totally hands-off for the employees. (In spite of the name I think a non-profit can do this too.) If the employer is genuinely looking to help younger and less-educated employees it can be pretty fabulous - basically the company just deposits money into the account for the employee without requiring them to give up part of their paycheck. I never really knew much about it but by the time I rolled it over into a 401k there was about $30k in it.

I'm not sure about admin costs compared to SIMPLE IRA and 401k, though.

And the downside is that they might not really learn any good saving habits from it. But the upside is that even the ones who don't make great decisions will end up with a retirement fund, and they probably will need it the most.

Companies these days have gone away from "paternalistic" things like hands-off profit sharing but there really is something to be said for them. Education and 401K matches will certainly help some of your employees, but you'll probably never be able to get to the ones who need it most. Putting money they never see into a profit sharing account may be the only way you can get some people to save for retirement at a young age. It's a very paternalistic attitude to have towards your employees, for better or worse, but if you can live with that it's not a bad approach.

Dollar Slice

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Re: How can I best help my employees start saving for retirement?
« Reply #8 on: December 09, 2015, 07:20:21 AM »
It's funny that you use the word "paternalistic" because it was a (partly) family business and I think a lot of the decisions were based on the owner wanting their not-terribly-responsible son to have a good life - good health care plan mostly paid by the company, retirement savings whether you like it or not, etc.

frenchlentils

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Re: How can I best help my employees start saving for retirement?
« Reply #9 on: December 09, 2015, 12:11:15 PM »
Thanks to everyone for your excellent responses! I think the Simple IRA may be the way for us to go, as I am wary of 401k fees and alas our nonprofit salaries are not astronomical. I would present it as an "opt out" situation to employees, and tell them I was going to sign them up unless they told me otherwise. I prefer "maternalistic," and as their boss I see it as my job to protect them and their interests.