Improve Your Retirement Plan to Improve Your Bottom Line

Christopher Nikolich: When we survey plan sponsors, they are telling us that their number one concern is how do they provide the information and the clarity and the ability for their participants to retire when they want to.

Andrew Stumacher: The way to do that is to focus on shifting the defined contribution plan from one that just focuses on savings to one that's going to work throughout retirement to really deliver income and deliver that peace of mind that people are looking for. So that they know while they're working, when they get to retirement, and for the rest of their life, that they're going to be taken care of.

CN: If someone can't afford to retire because they don't have clarity on their income in retirement, well, that's not only going to cost the plan sponsor more to keep them on. That means the person that was supposed to be promoted into that role is not going have that opportunity. Maybe they leave. Maybe at the entry level, you can't hire and promote out of undergraduate or grad school just because you're not seeing the turnover in a good way that you used to. Because when people felt as though they wanted to retire, again, they had that clarity that they could do it.

AS: The last thing you want is a surprise where you can't retire when you were expecting. That's not good for the organization. It's not good for the person who's trying to retire.

CN: There have been surveys that have been done that calculate the cost annually of someone not retiring when they'd otherwise like to. And that's in excess of $50,000 a year. There are other surveys that show the amount of time they worry about their finances when they're on the job is on average 13 hours per month. So this isn't just from the perspective of the plan sponsor to provide a benefit that their participants need and desire. It's to help their bottom line as well.

AS: And the employees who are seeking jobs in this really competitive marketplace are evaluating the total package. It's not just salary and other benefits. It's not just check the box, they have a 401(k) plan. It's, "Do they have a 401(k) plan that's actually going to do something for me? 

CN: The C-suite is very focused on attracting and retaining talent. They're also very focused on the compensation that they have to pay to do so, which becomes even greater in a very tight labor market. Wouldn't it be great for the C-suite if the retirement plan could be used to attract and retain talent, because offering a retirement income solution puts you at a competitive advantage versus your industry?

AS: And compensation is very unpredictable from year to year. And when you start out in your career, you're not sure what your salary and your compensation, your hard compensation, will look like in 10 years or 20 years or at retirement. But a retirement income benefit, it can be a really tangible benefit for everyone in the organization. And it's really invaluable because it's providing you with something better than compensation, in a way, and that's that clarity and confidence that you're going to someday retire when you start working in an organization.

CN: And it's not just for prospective employees. It also helps the investor who's thinking about that company as a potential one they might want to make an investment in. What does their turnover look like? What are people saying on venues such as Glassdoor? I think a lot of people aren't necessarily making the linkage between a retirement income program and ESG, but that's something that your potential employees and your potential investors are making those linkages today.

AS: You're more efficiently managing your talent. You're more efficiently finding new talent, more efficiently retiring people, right? If you think of that whole career ecosystem, it just functions much more smoothly with a retirement income plan in place.