Starting small on a vacation in the short term, as in, less than a year away, helps employees learn to focus on a distant goal. Learning to set aside a small amount (which might get larger as the savings plan goes on) can help employees who struggle to think they can do it get started.
You know what they say about Death and Taxes. No, not about how it’s unavoidable, but that only the weird kids talk about them at parties. That’s also true with retirement planning. While some Millenials put their Gen X bosses to shame in how they’ve prioritized retirement saving, many in their age group forgo thinking about their golden years entirely. Those who do swap tips on retirement readiness may find themselves outside the cool circle at the party but laughing themselves to the bank later having captured the power of compounding interest. Every one of those extra $20s they managed to save in their twenties builds wealth while sitting in investment accounts, and even better if they are matched by an employer in a retirement account.
So if the topic is slightly grim, how can a plan sponsor help employees learn to save, and learn to talk to each other about saving? Vacation planning might be a gateway into learning important aspects of saving for retirement.
For those in their twenties facing down a serious amount of student debt, with the average monthly student loan payment being reported at $393, retirement may sound like Peter Pan’s Never Never Land. But a vacation may be smaller, and closer goal. As with learning any new skill, starting with something small, like driving the stick shift car down the block, is generally easier to tackle than a huge goal, like driving the stick shift car in traffic in Manhattan. Sponsors can help younger employees see saving for a goal like a vacation as driving the car down the block, not in mid-town traffic. With that practice in saving, research and planning, they can get ready for mid-town rush hour.
The key to saving is to start.Getting employees to start anywhere, even with a small amount, is the most important thing. They’ll never learn to drive that crazy car if it sits at the curb. Starting small on a vacation in the short term, as in, less than a year away, helps employees learn to focus on a distant goal. Learning to set aside a small amount (which might get larger as the savings plan goes on) can help employees who struggle to think they can do it get started.
Get a boost.Just as maximizing an employer’s match to a 401(k) can be an enormous help to those becoming ready for retirement, so too can finding incentives for vacation planning. Timing a vacation to take advantage of pricing can be just such a boost. Say your employee loves small wineries and longs for a trip through New York’s Finger Lakes district. Just by waiting two weeks past prime, hotels drop significantly in price and wineries often have special pricing on meals or classes with sommeliers.
Think of the costs as details that ensure the best experience. Thinking of the costs of a vacation can have employees short-circuiting, or worse, ending up unprepared. Instead, planning with an eye towards the best experience can help employees focus on the positives. Just as checking the weather helps you pack the right clothes for the trip, so too does doing research about the best routes into and out of the vacation spot, finding local restaurants and other special spots. This research process helps employees learn to focus on their specific, individual needs and build a process of learning to find a variety of sources, from the professional, to the amateur to the family friends. That’s not dissimilar from learning how to optimize a retirement readiness plan.
The proof is in the process. Most folks that are successful in saving for a vacation do so through a separate or dedicated vacation account. Learning about which kind of account, like a high-yield savings account or money market account, makes the most sense can help employees start to learn how interest can boost their savings. They can also see that by setting money aside in a dedicated account, they won’t have the temptation of going to it for non-essentials, like clothing or dinners out. Even better, if employees can learn to set up automated payments into the account, they might not even feel the difference in their monthly budgets.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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