Do they even have an account?

One third of Americans have only $5,000 or less saved for retirement, and 21% of all Americans have nothing in their retirement accounts according to a recent study by Northwestern Mutual. While many hope to rely on social security payments, they know the likelihood of social security payments being available when they retire is shaky. Worse yet? Even the Social Security Administration recommends that retirees have $1 million saved to supplement social security payments.

Some analysts suggest that the number of Americans with retirement accounts has dropped because of the market crash ten years ago, in 2008.  According to Bureau of Labor Statistics, in 2006, 51% of Americans working in the private industry participated in retirement accounts. And, some experts estimated that between 2006 and 2008, retirement accounts lost $2 trillion. At the time, those retirement savings may have been a family’s only source of savings.

These statistics have a silver lining if you dig into the data a little bit. Employees may feel an “all or nothing response to retirement savings.” If the average grocery bill per month for American families is $300 (according to a USA Today survey) and the average housing cost per month $1500 per month, health care costs are $385, and the cost for cars, trains and automobiles for work and life is $750 with an average income per family of $74,000, asking those families to put aside $800 or more per month in retirement savings may seem like a bridge too far. Especially since that amount might be more than 50% of the remainder of their income after those essentials are met. Yet, online retirement calculators suggest that for a family earning $75,000 per year with no current retirement account set aside $582 to $858 per month.

Employers and plan sponsors can undo this all or nothing mentality by encouraging those without accounts of any kind to start small, or smaller. Many in the retirement industry compare financial and physical fitness: the key is to take the first step. Some online retirement companies suggest setting all of the financial goals for a family at once. Ellevest, for example, walks its potential investors through setting goals for emergency funds, housing, kid’s expenses (big birthday parties, special trips), and retirement at the same time. That way, employees can see a waterfall effect to their savings. By filling up the emergency savings bucket first, they then can take the same amount of savings and move it into housing, or kids parties, then on to retirement.  That waterfall approach keeps employees from feeling like they have to set aside all of the $858 or none at all.

Reframing saving for retirement by looking at compound interest examples can also be helpful. If an employee can see that some savings, any savings, can grow itself over time, they will be more likely to set something aside now, rather than waiting until other key goals are accomplished and they can set aside the full $858.

Additionally, if employees are saving for household emergencies or unexpected expenses rather than retirement as the numbers suggest, employers and plan sponsors can help shift employee’s perspective to view the company as part of its safety net. For example, when Houston was flooded in 2017, some companies with locations in multiple states encouraged employees to give to their own. Some companies turned annual meetings and training sessions into supply and donation coordination efforts.

According to the Investment Company Institute, retirement account contributions increase as job tenure increases. In other words, encouraging employees to remain in the company, helping them feel that their position is safe and broadcasting that the company will fare well into the future, increases the likelihood that those employees will open and maintain a retirement account.

Finally, employers and plan sponsors may be able to encourage employees to save for retirement solely by letting them know they aren’t alone.  Removing the shame from the investing game can go a long way towards getting employees to approach financial advisors with questions or work on individual goals. Simply noting how many Americans, or how many employees at a particular company, have no retirement may remove the sense of failure of employees who haven’t saved.