You Can’t Talk About That at Work: Tackling Financial FAQs

Insight By
Mike Iley
Topic
Retirement Plans
Talking about money is tricky, especially at work. While it may seem too personal for work and easier to avoid the conversation, the effects can have a lasting effect on a company.

More and more forward-thinking employers are starting to overcome the stigma that surrounds talking about finances at work. They are putting to rest their fear of overstepping boundaries because employees strongly value financial guidance at work. In fact, 87% of employees want help and nearly 9 out of 10 take advantage of financial wellness services when offered.[1]

Stress Impacting the Bottom Line

It is well documented that financial stress can cause a myriad of workplace complications. Stress can have a cascading effect; for example, 4 in 10 employees experience health issues or loss of sleep due to financial stress, which in turn leads to a $400 annual increase in healthcare costs per stressed employee.[2]

Stress also has a way of consuming productivity; 3 in 10 employees admit that financial stress has impacted their job performance, and they spend three to four hours a week at work dealing with their finances.[3]  That’s 150 hours of lost productivity per stressed employee per year.  That’s a lot!  

The Elephant in the Room  

When companies are up against a complex problem like financial stress, how do they start attacking the problem? Like the saying goes, you have to eat the elephant one bite at a time. Financial guidance and education is a great ways to start combating the problem.  

One of the most important areas of concern for employees is retirement readiness, so employers need to emphasize communication around the topic.  

Good employee communication is a must, especially letting them know there is no such thing as a “stupid” question. Emphasize that they shouldn’t be hesitant or embarrassed to ask the questions on their minds. Here are some questions employees might ask about saving, investing, and planning for retirement.

Tackling Employee FAQs

Why save for retirement? First, to help you in the event of an emergency or for large-ticket items such as a house or car. It is also very important is to save for retirement if your goal is to be financially secure when you’re no longer working. You don’t want to depend on Social Security for your total retirement income.

When should I start saving for retirement? Now. The sooner the better. It’s easy to see retirement as something in the future and not an important event you need to start preparing for at an early age. Additionally, if you don’t know how to start, what to invest in or understand the power of compound interest, you might feel like putting it off. Schedule time with your financial advisor at LoVasco if you don’t understand your plan.

What is compound interest? Compound interest is interest paid not only on the money you’ve invested, but on the interest you’ve already earned. Because of compound interest, even small amounts become larger over time.  

Explain investments to me. What is an stock & bond? What are mutual funds? An investment is a way of putting money aside so you can get a return on it. Investments are often thought of in terms of stocks and bonds. Your 401(k) plan has investments to put your contributions into, so take advantage of them. A stock is an investment that represents partial ownership of a company. Units of stock are called “shares”, which may pay interest and dividends to you as an owner. They’re traded on the stock market, where the price can fluctuate up and down. A bond is an investment where you lend money to a company (or a government); the borrower then pays interest until the bond matures at which time you should receive your money back. Your 401(k) plan may have a variety of investments such as mutual funds, a type of investment in which many investors pool their money in securities like stocks, bonds, and money market instruments. It might also contain Target Date Funds, a type of investment, often consisting of mutual funds, structured to grow over a specific time frame and then become more conservative once that target date, usually at retirement, is reached. Like stocks, the value of mutual funds and target date funds can fluctuate.

Is my investment strategy correct for me? The investment mix you selected years ago may not be the right one for your current financial situation. Generally, most people should gradually take less risk with their investments as they approach retirement years. Everyone is different so don’t hesitate to schedule time with an advisor to discuss.  

Should I take a loan from my 401(k) balance?  If your plan allows it, you do have the ability to take up to 50% of your vested account balance as a loan from your 401(k).  This is generally discouraged as it erodes the compound interest factor we discussed above. However, if you encounter a financial emergency and your emergency savings fund is depleted, a 401(k) loan is an option.

How do I enroll in the plan? Enrollment is easy. Your HR department should be able to provide you a link to the plan’s 401(k) provider website. You’ll be asked to enter some personal information, a salary deferral amount, and investments.

Teamwork Makes the Dream Work  

Speaking with a financial advisor or joining a financial wellness education session can engage and assist employees in being more financially responsible, take better advantage of their 401(k) plan and be more “present” at work.  

After all, 82% of employers subscribe to the belief that it is in their company’s best interest to help employees become more financially secure. Employees tend to agree: when employers demonstrate a commitment to their financial wellness, 60% of workers say they are more dedicated, loyal and productive at work.[4] It’s a win-win situation for all!  

Contact us to discuss common employees FAQs and ideas to reduce workplace financial stress that can elevate savings.

Insight By
Mike Iley
Managing Director
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File Number

3866266.1

Topic
Retirement Plans
Published on

November 15, 2021

updated on

November 15, 2021

Disclosure

This article is for educational purposes only. The tax and legal references attached herein are designed to provide accurate and authoritative information with regard to the subject matter covered and are provided with the understanding that LoVasco Consulting Group is not engaged in rendering tax or legal services. If tax or legal advice is required, you should consult your accountant or attorney. LoVasco Consulting Group does not replace those advisors.

Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a registered broker dealer and Investment Advisor, member FINRA / SIPC. LoVasco Consulting Group is independently owned and operated.

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