Executive Summary

Employers Have Vested Interest In Offering
Financial Education

John G. Turner
Chairman & CEO of ReliaStar Financial

November 1997

Employers are concerned about their workers’ financial futures. That was one of the key findings of a national research study conducted last year by ReliaStar Financial Corp.

Sixty-one percent of mid-size employers believe the financial security of employees will deteriorate over the next five years. Among the most common reasons cited for the pessimism are employers’ uncertainty over the future of Social Security and Medicare, and the workers’ own lack of personal savings.

No doubt some of this pessimism is shared not just by employers at larger companies, but by many of the workers themselves. The prospect of building a financially secure future, especially one that includes a comfortable retirement, is daunting for many working Americans.

Yet, contrast that pessimism with the results of a recent ReliaStar survey of 65-year-old men and women who, for the most part, are just entering retirement. Three-fourths of the people surveyed believe they will have enough savings to carry them through their retirement years. Only 18 percent of America’s 65-year-olds view retirement as a time of financial worry.

These two findings - employers worried about today’s workers while 65-year-olds are looking forward to retirement with confidence - speak volumes. Public and private safety nets - Social Security and employer-sponsored pensions - create a solid and predictable financial foundation for many older Americans.

Not so for many of today’s workers. The decline of traditional pension plans and the uncertain future of Social Security have sent a clear message that future retirees must take responsibility for financing their golden years.

The good news in all this is that people have more insurance, savings and investment options than ever before. But having the opportunity does not guarantee that the goal will be achieved. The fact is, building financial security is a complicated task.

Helping Employees Get Smart

Where does the employee turn for information and education on which strategies - whether the issue is directing a 401(k) contribution, investing in the stock market, or purchasing an annuity - are right for his or her circumstances?

A logical place to turn for this in-formation is the worksite. As self-directed retirement plans and diverse benefit programs place more choices in front of employees, many employers are accepting the responsibility of giving workers access to the financial education that will help them make informed decisions.

Employers who are asking their workers to assume more responsibility for their retirement plans have a stake in providing financial education about the options available. In fact, the U.S. Department of Labor specifically encourages employers to provide this kind of financial education.

We’re witnessing these changes first hand at ReliaStar through our operations that serve employers’ and employees’ financial security needs. In response to the growing demand for employer-provided financial education, last year we expanded our worksite operations to include a new business unit focused on delivering in-depth, objective financial education seminars in the workplace. Employer interest to date has exceeded our expectations and underscores the fact that more and more employers are making it a priority to educate their employees.

Three Steps To Financial Security

Those who today are enjoying a comfortable retirement almost always will say their financial security is a result of three actions they took during their working years:

First, they made a plan. The old adage is true: If you don't know where you are going, any road will get you there. How important is a financial plan? A 20-year study of Harvard graduates found that the three percent who had written financial plans were worth more than the 97 percent who did not have plans.

Second, they started early. It’s the miracle of compound interest. A 25-year-old who saves $30 a week will have more than $820,000 at age 65.

Third, they were involved. Creating long-term financial security is a participatory activity. The most successful are those who understand their choices and are actively involved in the decisions that affect their money.

Many of today’s workers have little appreciation for these three basic principles of financial security. They haven’t been exposed to financial education and likely won’t be unless it is convenient and in a comfortable setting. Few places qualify better than the worksite on both counts.

Financial education through the worksite is not just a one-way street. Employers also gain. Financial education can help employees better understand their entire benefit program, including their retirement plan, enhancing their appreciation of the overall value provided by the employer. In addition, financial education can promote more efficient use of employer-provided benefits, resulting in long-term employee benefit cost-savings for employers. In today’s competitive employment marketplace, financial education can be a distinctive advantage in attracting and retaining employees.

Most importantly, though, equipping workers with the information to build and manage their own financial security makes for more empowered employees, a stronger marketplace and a healthier society.

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