There are a variety of factors behind retirement plan participation levels and saving rates; among them is the belief that one simply cannot afford to set much aside, if any at all. A recent blog entry suggests that budgeting — as in, helping participants or potential participants do it — can be a way to defuse that obstacle.
In “Budgeting and Retirement Plan Engagement,” an entry in Cammack Retirement’s Top of Mind Blog, Michael Webb writes of witnessing a demonstration of a budgeting portal for plan participants that allows them to easily determine the amount they can set aside for employer-provided benefits and do so in a way that would best meet their needs.
Webb avers that providing such a portal can be expensive in money and time, but he suggests that the cost is worth the price in the long run.
“You may be asking yourself, ‘Why in the world would a retirement plan recordkeeper be providing a budgeting portal?’” Webb writes. He responds the most likely answer “is that this recordkeeper has hit the wall on increasing retirement plan savings and other engagement, and is therefore thinking outside the box in terms of how to grow retirement plan assets.”
Webb continues, “The reality today is that the primary reason why participants do not save (or do not save more) in retirement plans is their belief that they cannot afford to do so” and that ideas such as providing participants assistance in budgeting is a departure from the more typical approach of simply suggesting to participants that they “buy fewer lattes.”
Providing a budgeting program is not a panacea, Webb admits, but still argues that “it is a step in the right direction.” He adds that “People who budget are far more likely to be able to afford retirement savings, since by budgeting they are getting a handle on the all-important revenue versus expense equation.”
- Log in to post comments