Beyond Salary

 401K 01A good 401(k) plan can help narrow the skills gap.

By Nathan Fisher

Competition for qualified talent in the construction industry is heavy, and employers need to think bigger than salary to stand out. One of the key benefits that attracts talent in any industry is a 401(k) plan, but the construction industry is behind when it comes to offering retirement benefits, and data suggests that those construction professionals who do have a 401(k) plan are underserved and undereducated.

The opportunity here is clear: if youre in the construction industry and you offer a good 401(k) plan, you are going to attract more employees, and keep them around longer. 

Catching Up

When it comes to retirement preparedness, the data suggests that not only is the entire American workforce falling short, but the construction industry is lagging even farther behind. A Government Accountability Office report on retirement security stated that between one-third and two-thirds of American workers are likely to have a lower quality of life in retirement because they haven't saved enough. This is a significant number of people who either aren't saving for retirement or aren't saving enough.

Looking specifically at the construction industry, we find things are even worse. According to the fifth edition of "The Construction Chart Book" from The Center for Construction Research and Training, participation levels in employment-based pension plans in the construction industry are very low: 38 percent for construction versus 54 percent for all industries. That means that a majority of construction professionals aren't actively participating in employer-sponsored retirement planning either because these plans aren't being offered, or because those employees don't know what to do with the plans they have.

One of the biggest challenges in engaging employees, in any industry, is awareness about retirement saving needs. The general rule of thumb in the industry is that any employee will require 85 percent of their pre-retirement income in order to live comfortably in retirement, for the length of their retirement. For example, if an employee makes $30,000 a year, they'll need to save $26,000 for every year they will spend in retirement. Since people are living longer, many can expect to be in retirement for at least 20 years, which alone adds up to $520,000 in savings needed to maintain a standard of living throughout retirement. The specific amount any given employee may need will depend on several factors, including their expected retirement date, their monthly expenses, and their life expectancy, but we can say with some certainty that if someone has not prepared to have around 85 percent of their pre-retirement income or more, they have not saved enough.

This is especially important to keep in mind as you consider how you'll retain talent in an industry where most employees have not saved at all, or not enough. In such situations, it becomes even more important that those employees have access to not just any retirement savings plan, but to one that will equip them to truly prepare for retirement.

Employees are Underserved

Clearly, this is an untapped opportunity for employers looking to offer attractive compensation packages with limited resources. When chosen well, a good 401(k) plan can be a win-win for both the employer and the employee, costing the employer little but giving the employee a significant boost in their ability to plan for the future. That said, a 401(k) plan is only as good as the benefit employees receive from it. We've found that many employees who have retirement plans feel unprepared to make intelligent choices when it comes to their own contributions and savings.

Most workers, including construction workers, benefit from additional help understanding basic questions such the pros-and-cons of participating in a plan, how much they should be saving, how to invest those savings, and when they might be able to retire. But most do not feel confident answering those questions without additional help; in a recent survey we conducted, only 29 percent of those polled felt confident planning for retirement with the resources they have.

The Right Plan

Unfortunately, this may be because not all 401(k) service providers offer the resources employees need to find that confidence, and many of those resources can be difficult for employees to trust. Thats because a lot of the companies that provide 401(k) benefits pay their advisers on commission for the sale of financial products that your employees may not want or need. Because of this, very few advisers can or will commit in writing to act in the best interests of your employees. That leads to employees relying on less qualified resources, such as peers, family members, or friends. Worse yet, some don't engage in their plans at all.

When searching for a retirement service provider, combat this by making sure first that the experts servicing your plan will be able to give reliable, one on one advice to your employees. This kind of counseling alone can improve participation rates by 39 percent, and can increase retirement plan savings by 68 percent. Beyond counseling, it's critical that your provider also offer a variety of tools to help your employees understand their plan and make the most of it. Look for online tools like contribution calculators and educational resources so your employees can learn more about retirement planning and make better decisions for their futures.

After all, that financial security is what 401(k) plans are all about. It seems reasonable that happy employees who feel secure in their financial futures are likely to make for better and more committed workers. In fact, 77 percent of those employees polled in a recent survey said they would rather work for an employer that not only offers a 401(k) plan, but also the support they need to successfully plan for retirement. That support, and the security it brings, could be just what you need to attract qualified construction professionals and keep them happy for years to come.

Nathan Fisher is managing director for Fisher Investments 401(k) Solutions. 

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