Author Topic: How to talk blue-collar workers into retirement savings  (Read 5024 times)

monstermonster

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How to talk blue-collar workers into retirement savings
« on: August 25, 2015, 11:40:57 AM »
So I've been lucky to be in the position of choosing the retirement plan & provider for my small organization (after all of this drama). I'm doing research into the best options (looks like we're leaning towards a Vanguard 403(b)), but now to solve the other issue:

I'm trying to figure out how to convince the mostly high-school educated, blue-collar workers (sub $32K/annually) at my job to contribute to their retirement. Currently out of 30 employees, only 4 contribute. Most of my co-workers think there's no hope to retire for themselves. How do I sell them on it without sounding like a preachy, college-educated paternalistic "office person"? Compound interest charts seem...annoying?

I know there's evidence that autoenrollment even at the 1% level is behaviorally the best way to do it. We also currently require you to wait 1 year, and now we're going to start it at 90-days with the rest of our benefits. Additionally, limiting the number of plans available for them to choose so there's less barriers to making a choice. We have no organizational match and currently can't afford it, so that's out the window.

Thoughts? Anyone have experience in this?

MillenialMustache

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Re: How to talk blue-collar workers into retirement savings
« Reply #1 on: August 25, 2015, 02:43:01 PM »
I find it admirable that you are concerned about this, and I think it is great that you have reduced two of the barriers to enrollment (time and too many choices). However, without some kind of match I am not surprised that a lot of people do not do it. Keep in mind I think at that point there would be few benefits to even having retirement with you all - they could have an account on their own somewhere else (I know that is not likely, but a they might). You say the company cannot afford a match - what if instead of raises at some point, you put 1% of their pay (or whatever) into a retirement account. That could be a start. Good luck to you. Maybe this post being bumped will help you find more answers.

NathanP

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Re: How to talk blue-collar workers into retirement savings
« Reply #2 on: August 25, 2015, 02:50:19 PM »
Since the company does not offer a match, the "free money" argument is not going to work. Also, there is likely little tax savings for lower income workers especially if they have dependents.

I would probably try to sell the retirement plan on the non-retirement benefits it offers. Mention the ability to withdraw funds in a time of hardship (medical issue, job loss) or for the purchase of a home. Sadly this is not great advice for retirement, but might be more relevant to your target audience.

matchewed

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Re: How to talk blue-collar workers into retirement savings
« Reply #3 on: August 25, 2015, 02:57:13 PM »
Opt out systems seem to work well. Can it be set up where when someone is signed up with the 403(b) they are automatically enrolled for a nominal percentage of their paycheck. And if they don't want to do it they'll have to contact HR and the like.

Paul der Krake

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Re: How to talk blue-collar workers into retirement savings
« Reply #4 on: August 25, 2015, 03:04:54 PM »
You could try talking it up as a way to not be dependent on the government in your later years.

If you are afraid of being seen as the out of touch boss, outsource the presentation to one of the many financial litteracy speakers from your local credit unions.

Fishindude

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Re: How to talk blue-collar workers into retirement savings
« Reply #5 on: August 26, 2015, 06:44:24 AM »
I have a similar situation.
We eventually went to auto enroll at the full matching level. 

We sell the program hard in our newsletter, occasional mailings to all employees, at an annual meeting, etc.
It takes time, but most are starting to get it and participate.

Gone Fishing

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Re: How to talk blue-collar workers into retirement savings
« Reply #6 on: August 26, 2015, 07:07:35 AM »
May not be the best vehicle to do it, but also talk up the legacy aspect.  Many people think everyone who is rich inherited it and think they are poor because they didn't win the "birth lottery".  It is almost certainly better than the life insurance often purchased for this purpose.  Do be careful you do not stray into financial advice, though, as it could open you up to liability.

Guava

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Re: How to talk blue-collar workers into retirement savings
« Reply #7 on: August 26, 2015, 07:28:27 AM »
My SO is a blue collar worker at this income level who thought he would never retire so he never contributed.  I showed him one of those graphs that shows how much money $20 a week could grow to over 40 years. He realized if he wanted to have a chance to retire,  even a small one, he could live on $20 less a week. He showed the chart to his coworkers and now there is a 90% participation in his work retirement plan.

Playing with Fire UK

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Re: How to talk blue-collar workers into retirement savings
« Reply #8 on: August 26, 2015, 09:32:17 AM »
Can you structure the system similar to 'Save More Tomorrow'?

I can't remember the reference, but the basic idea is that you give an option of saving 0 or 1% now, and then that automatically increases over time.  If you get regular raises then time it so that half of the raise goes into the retirement fund and half into the paycheck. The increases then continue until they reach a target % or $ limit. (I think the original system stopped at 10%).  I think there is also a 'give more tomorrow' programme that may have more information but is based on charity donations.

Dunno about the practicalities of applying this in your company. I'd second an employer match if there is anyway of doing this (now or future).

Could you also run a lottery competition for people that agree to enrolling or increase their contributions? Maybe extra vacation days?

HazelStone

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Re: How to talk blue-collar workers into retirement savings
« Reply #9 on: August 28, 2015, 11:14:00 AM »
It was a long while before I got a job that offered a 401k match. A couple of the other jobs had one, but they were crappy, high fee plans. So I saved on my own in a Roth, because for a while my income was in the range you cite. I worked for an employee benefits broker for a few years, and pitched plans to a fair few blue collar people. One objection some had to participation was that (they thought) it showed Management they didn't really "need" the money and so it'd blunt future raises. In some places, this view was not entirely unfounded- including my own office. Others mentioned large child support payments. A fair few 401k plans out there have high fees - especially if it's a small business. The small businesses where I worked had high fee plans, no match, so why the hell would I want to save with them? If you've got a low salary, unless you are living with your parents, you're unlikely to make your full IRA contribution, much less have anything to spill over into a 401k.

If the plan has low participation, then the higher-paid employees/owners may be limited in the amount they contribute to their own 401ks. Someone already mentioned diverting raises to a 401k contribution. But in a place that can't afford a 401k match, cost of living raises are not a given, either. Even so, 1% of 30K is $300. If the org can't front $25 per employee/month into a 1% match (auto-escalate contributions, not necessarily the match, later)... should it be all that surprised if the employees feel they are too pinched, as well?

Or, depending on your benefits package, others may want to focus their pennies on a short term disability plan. Prioritizing the most likely/urgent risks is still rational.

AlwaysLearningToSave

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Re: How to talk blue-collar workers into retirement savings
« Reply #10 on: August 28, 2015, 11:58:21 AM »
I think reducing the waiting period before eligibility is your best tool.  You might even consider going shorter than 90 days.  I know employers only want to allow employees with longevity into the plan, but behaviorally a one-year waiting period can be crippling. 

Picture it this way:  the employee starts the new job, isn't sure what his/her financial situation will be like, so is conservative at first, but then discovers after a few months that s/he has money burning a hole in his/her pocket.  So the employee finds a way to spend it, either on inflated irregular things (like meals out, concerts, travel, etc.) or on larger purchases that have continuing obligations (i.e. new car, boat, motorcycle, or too-big house).  All of these lifestyle-defining events occur before the employee even has the opportunity to make the wiser decision of contributing to the 401(k).  Once the employee has gotten used to having the money in his/her wallet, the it is going to be that much more difficult to convince the employee to not touch some of it. 

If from day one, the employee has a chance to set the money aside, the employee can pay himself first and never have the temptation of having the extra money in the bank and available to either spend or save.  Day-one enrollment, combined with auto-enrollment, could help significantly.  The 90 day wait period to coincide with the other benefits is probably a close second because it at least consolidates the employee's financial changes into a single event. 


trailrated

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Re: How to talk blue-collar workers into retirement savings
« Reply #11 on: August 29, 2015, 09:19:53 PM »
When you call the company about setting up a plan, most are willing to send out a representative that essentially makes a sales pitch to everyone in the organization (company meeting) on the benefits, etc. we start early in the morning and got the rep to show up at 5:15am for the meeting. Participation jumped from 10 out of 29 employees to 21 :)

Trudie

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Re: How to talk blue-collar workers into retirement savings
« Reply #12 on: August 30, 2015, 05:38:55 AM »
We've tried at my small organization as well.  We've done a great deal to make it worthwhile.  We pay all fees.  We have a guaranteed 3% safe harbor which they earn without even contributing.  Above that we match 3% dollar for dollar and make an annual discretionary contribution of 3-4%.   So, annually our employees can get 10% of free money.  Still, we have a few hold outs who won't participate.

I'm the accountant.  A few years ago we put all of their pay rates and deduction codes into the test payroll system and actually kicked out a check stub showing them what their paychecks would look like if they participated at even the minimum levels.  Still, no additional takers.

I think there are always people who live day to day and live paycheck to paycheck and really can't take a long term view.  I have chosen to give up on them and instead focus my attention on those who are already on board.

calimom

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Re: How to talk blue-collar workers into retirement savings
« Reply #13 on: August 31, 2015, 09:20:34 AM »
Is it safe to assume this is a for-profit business as opposed to a non-profit organization?

It's great you're interested in helping your coworkers get started in retirement savings, so many do not see the long term benefits when they're just getting through the day to day. But how come your bosses do not offer a matching plan?  Is it the fact that they truly *can't* afford or just do not *want* to invest in their workers in such a way? 

The "free money" aspect goes a long way in worker buy-in and absolutely adds to the worker gain, while generally benefitting the company long term by lowering taxes, happier employees with lower turnover, etc.

monstermonster

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Re: How to talk blue-collar workers into retirement savings
« Reply #14 on: August 31, 2015, 09:38:28 AM »
Is it safe to assume this is a for-profit business as opposed to a non-profit organization?
We're a non-profit.
But how come your bosses do not offer a matching plan?  Is it the fact that they truly *can't* afford or just do not *want* to invest in their workers in such a way? 
The "free money" aspect goes a long way in worker buy-in and absolutely adds to the worker gain, while generally benefitting the company long term by lowering taxes, happier employees with lower turnover, etc.
The books don't support it right now, sadly. We have completely open internal finances and we're scrimping everywhere (and always have been.) It's a long-term goal to be able to match, but I was at risk of losing access to my 401K entirely because of the low participation rate, and that was to cut a $2400/annual cost, so a match, if 50% of workers participated, would be closer to $4500.