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How to increase employee participation in your 401(k) plan

How to increase employee participation in your 401(k) plan

The next time you look into the mirror, imagine yourself 20 years older. You’re not just older, you have 20 more years of knowledge and wisdom behind you. What would this person tell you to do today to make sure you’re better off in 20 years? Aside from eating well and exercising, they would tell you to pay down debt and save more for retirement. This is how employees must be approached when it comes to saving more toward future retirement goals. It’s too easy to postpone boring tasks like saving to a 401(k) plan. It can be done tomorrow. But when we’re faced with tomorrow, today, our behaviors change.


Do develop a financial wellness program and stick to it

The knee bone’s connected to the thigh bone. The 401(k) bone’s connected to the budget bone. What you may not realize is that it’s also connected to the debt bone, the college bone, the tax bone, and the insurance bone. A comprehensive financial wellness program can bring all of these topics together and help employees coordinate finances to save more to the 401(k).

Do use psychology to create priority today, not tomorrow

As discussed in the introduction, mentally place your employees at a time in the future. They will likely imagine a better, healthier and wealthier them. However, good financial habits must make this dream come true. By bringing tomorrow into our current lives we rethink our priorities.

Do focus on areas such as budgeting which may free up more 401(k) deferrals

Many employee claim they don’t have enough money to save toward the 401(k) plan. However, many times they simply don’t understand how much they make or how much they spend. A simple budget puts everything into focus and typically allows more room for debt payments and retirement savings.

Do provide education on company time, not optional lunch hours

Going to the gym once or twice a year doesn’t make you healthy, nor does one or two lunch and learns make someone better financially. Financial wellness program must be ongoing and on company time. It’s worth the money if employees become more financially sound.

Do give employees the ability to speak with an expert one-on-one, even at a fee

Some employees are self-motivated. They can see a one-hour educational program and run with it. However, most people need a little hand-holding. Allowing them to meet with a professional, such as a board-CERTIFIED FINANCIAL PLANNERTM, allows them to receive custom advice. This service may come at a fee, but it is an investment.


Do not have infrequent financial education

Financial wellness and financial planning are not events, they are processes. They are ongoing and never ending. This is why one-time financial education programs don’t work. Financial planning must be kept top of mind, so employee must be reminded often.

Do not bring in a “wolf in sheep’s clothing”

If you seek out a general financial professional, chances are you will bring in a salesman in an educator’s clothing. Avoid professionals that are not CFP® professionals and those that work for firms that produce financial products.

Do not talk over employees heads

Using technical jargon and investment-talk are beneficial to some employees, but most people don’t understand the ins and outs of a 401(k) plan. They need the same type of lesson that a teacher would provide.

Do not focus solely on web-based education

Not only are some employees computer-shy, web-based retirement education can easily fall dormant once an employee loses their motivation.

Do not rely on just the 401(k) advisor or plan sponsor to motivate employees

If Fidelity runs the 401(k) plan and a Fidelity representative tells employees to save more to it, some employees will assume it’s being recommended just to help Fidelity. An outside party that can motivate and educate employees may be better suited for advice.

Jumping cartoon

Employees understand saving for retirement is important, but like dieting, it’s easy to go back to old habits. Keeping goals top of mind should help employees focus on what it takes to achieve them. As employees save more and make better financial decisions, this should accelerate the rate at which they retire. In turn, this may help the business save money on these “senior” salaries. The benefits to retirement savings are obvious for employees, but we can’t ignore the benefits to businesses.

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Photo Credits: © jeff Metzger -; Check Man, Cross Man and Jump Man © ioannis kounadeas -

Travis W. Freeman, CFPPresident

Travis Freeman is the President of Four Seasons Financial Education, a regular contributor to local and national media such as Fox and NBC news, the author of Make Your Money Work and a national financial literacy advocate. ...

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