How to Navigate Retirement Plans And Improve Employee Focus

Did you know your Payroll department influences how well your employees focus at work? 

Here’s the proof: A recent study found 58% of employees struggle to focus because of financial stress. That’s from the 2023 Betterment At Work Retirement Readiness Report.

Employee stress over money runs deep—especially when it comes to retirement. Here’s what a few recent surveys have found:

  • 40% of American workers have tapped into their retirement savings to assist with short-term expenses. (Source: Betterment At Work Retirement Readiness Report)
  • 42% of American workers are unsure if they’re on track to retire comfortably. (Source: MassMutual)
  • 58% of American workers live paycheck to paycheck. (Source: CNBC)
  • Roughly 70% of American workers feel stressed about their finances. (Source: CNBC)
  • 80% of American workers lack a passing level of retirement income literacy. (Source: The American College of Financial Services)

That means anything that alters their paycheck—taxes, deductions, withholdings, anything—can negatively impact their wallet and their productivity. In fact, one study out of India found that simply paying workers sooner can increase their output by 7% while simultaneously reducing costly, unintentional mistakes!

The data is clear: While companies may lack the financial resources to provide across-the-board raises, focusing on your existing retirement plans for employees could have immediate, long-term benefits for the entire company.

Building A Better Retirement Package

Properly explaining your retirement benefits to employees can soothe some of their financial concerns and make them feel prepared for the future—which can then make them better, more effective employees. 

The ideal retirement package for an individual employee revolves around three critical components:

1. Taxes

The withholding for retirement savings is already painful enough for some employees, but taxes can make it even more painful. Each retirement plan type handles taxes a little differently. 

In a typical 401(k), for example, contributions are made pre-tax, meaning they won’t pay tax on their retirement earnings until they withdraw years later. 

A retirement option like a Roth IRA, however, is fueled by taxed income, so employees don’t pay taxes on their withdraws later in life (provided they’re withdrawing funds within the set rules for a Roth IRA). 

A typical 401(k) plan may offer employees a little extra financial flexibility in the moment versus a Roth IRA.

2. Investment Strategy

The investment strategy is where most employees could use the most help, as the ideal investment strategy for one employee isn’t necessarily the ideal strategy for another employee. 

Age, risk tolerance, and goals all influence how an individual employee should invest their retirement savings. 

Giving your employees transparency, guidance, and consultations around how best to manage their investment strategy is critical for giving them the peace of mind that they’ll be prepared for their retirement years. 

3. Income Planning

For those planning to retire, the typical advice is to replace 70%-90% of your income through savings, retirement accounts, and social security. If you’ve been taking home $6,000 per month before retirement, you should plan to need between $4,200-$5,400 per month in retirement. 

A good retirement plan helps employees figure out exactly how much they need—and where that money will come from once they’re done working.

Access Retirement Planning Support

As your expert Payroll partners, we coordinate with financial planners and retirement companies, like the incredible folks at Human Interest, to ensure you and your employees receive the best service possible. 

We can electronically upload the per-day deductions and funds to the retirement company on your behalf or prepare and send an itemized page for each employee detailing the necessary deductions so you can remit the monies yourself. 

Plus, we have expertise in a wide variety of retirement plans, including:

  • IRA – Individual Retirement Account, which comes in four varieties: Traditional IRA, Roth IRA, Simplified Employee Pension (SEP) IRA, and Savings Incentive Match Plan for Employees (SIMPLE) IRA.
  • 401(k) – A tax-advantaged retirement plan commonly provided by employers.
  • 403B(b) – Used in public schools and certain 501(c)(3) tax-exempt organizations.

Learn More About The Payroll Shoppe

Help your employees feel better about their finances and retirement planning. Work with The Payroll Shoppe. 

To learn more about our retirement services, contact us. We have a robust HR Support Center, detailed Hiring & Onboarding Processes, and Complete or Ancillary Payroll Services to simplify your processes and workload!