Speaker 1:
As bank that focuses on business, we work with business leaders all day, every day. We have a front row seat to what's working and what has potential. The First Business Bank Podcast is dedicated to sharing insights to help you work better, smarter, and faster to achieve your goals. Let's get into the show.
Mark Meloy:
Hello, I'm Mark Meloy, CEO of First Business Bank. Welcome to the First Business Bank Podcast. Today, we're talking about 401(k)s and helping employees maximize their 401(k) benefit. Employers are in an intense battle for talent and benefits can be a key driver and a prospective employees decision as to where they go to work. Today, we're going to talk with a couple of experts from our First Business Bank team who will offer their thoughtful advice to business owners and HR leaders about how to leverage one of the most important long-term benefits an employer can provide their employees. My guest today will each introduce themselves before we get our conversation started. Jim, we'll start with you.
Jim Myers:
Hi, my name is Jim Myers and I am the senior participant service director at First Business, and my primary role is to work individual with each participant in 401(k) plans.
Mark Meloy:
Thanks. Brendan.
Brendan Freeman:
Hi, I'm Brendan Freeman and I lead the private wealth team at First Business Bank.
Mark Meloy:
Right. Brendan, I'm gonna start with you. What are some of the benefits to companies when workers save enough for retirement? Or maybe ask in a different way, why is it in a company's best interest to encourage its employees to save for retirement?
Brendan Freeman:
Sure. Mark. You know, retirement can be a big worry, it's a big stress. And so employers can really make their employees feel more comfortable if they feel like they're on track, if they're saving and if, when they envision the future, that future looks stable, consistent, and maybe even that future looks really bright as far as new opportunities and that kind of thing.
And so from our perspective, if you have employees that feel like the future is stable, where, uh, there's not uncertainty, there's not high levels of stress, that can allow them to be more productive, that can allow them to be more focused, not distressed, not worried. On the other hand, if that future doesn't look so bright, that can really detract, and that can be a- a real challenge for individuals, especially as they get closer to retirement age. And so having those conversations, having resources available to employees, having that benefit, uh, seeing them well beyond their working years can be a real, uh, solid attribute, and there's a real business case for that.
Mark Meloy:
Great. Thanks. Jim, what are effective ways for a company to encourage its employees to save for retirement?
Jim Myers:
Sure, Mark. I firmly believe that a generous match is the number one reason to participate in a plan. And I always tell those participants to take full advantage of that free money. In addition to that, having a strong voice from senior leadership and then also a presence from someone like First Business to be onsite and to also encourage those participants really- really helps out. Uh, one of our longest standing clients in our company retirement plan does just that, they offer a very, very generous profit sharing, they make it known to the participants in the plan they analyze what the competitors are doing. And then most importantly, we are consistently onsite offering a different voice, telling those participants just how important this plan is.
Mark Meloy:
Good. Brendan, how do employees typically determine the amount to save for retirement?
Brendan Freeman:
Well, without much thought, Mark, a good rule of thumb is 10 to 15%. Um, that's- that's a consideration, especially when you think about what Jim just mentioned, which is the match or any type of profit sharing plus the employee's individual contribution. And so a good rule of thumb is that 10 to 15%. Uh, interesting in the last several years, there's also been this concept of income replacement, uh, used to be that you had a number and everyone walked around with their number of, I need to save this asset level, I need this certain dollar amount.
The industry is evolving where it's not necessarily just a number, it is how am I gonna replace a certain level of income and for how many years into retirement. And so as employees, there are a lot of tools that are available and employers should consider those tools and those resources that are available to those employees, like in terms of calculators and websites and podcasts like this one, where employees can start to try to determine how much they're going to need in retirement, how much income they're gonna have to replace.
And there's lots of factors that go into those, uh, considerations, like the amount, the money that's saved, the- the match, the, uh, investment return, the level of expense in retirement, the number of years in retirement, all those types of things. It's an important conversation, and it's something that, uh, as Jim mentioned, you know, having lots of conversation internally within the company and even bringing in resources like First Business Bank to have those conversations, it's pretty important.
Mark Meloy:
How does offering a retirement plan affect the company's ability to attract and retain employees? And then also does that increase when companies actively encourage employees to save with ongoing education?
Brendan Freeman:
Absolutely. Uh, from a perspective of retaining and attracting great employees, you know, we're all in a war for talent right now, that's a big challenge, uh, across many, many industries. And so there are some industries where having a 401(k) is a differentiator compared to competitors. There are other industries where that 401(k) plan is table stakes, that's- that's a requirement. Uh, an employee might not even consider going to a firm that doesn't have a 401(k) plan. And so you have to make sure that you have an attractive offering there if you're trying to retain and, you know, keep great employees, and also if you're trying to attract employees. The company match, or the profit sharing contribution is an important component here. And this is something that prospective employees will compare, they'll say, "Okay, you know, this firm doesn't have much of a match while this firm might match me dollar for dollar up to 4% or up to 6% over whatever the company might be offering, over many years with compounded interests, that makes a huge difference.
In terms of your second question, uh, when employers encourage employees to actively increase their contributions and, you know, really pay attention to their contributions, that really does make a difference. We found that some plans have auto-escalation provisions where, you know, over time we increase the amount of contribution. And we found that also just having conversations where someone like Jim comes out and sits down and has a one-on-one discussion with an employee, or we have a group meeting or- or something where we're talking about increasing contributions, those discussions lead to better outcomes, and we found that the more we talk about it, the more we kind of bring it in front of mind, uh, the more successful, uh, our employees are gonna be in saving more for retirement.
Mark Meloy:
Good. [inaudible 00:07:32] Jim for you, you're in role where you're speaking to a lot of employee groups, you have a lot of individual conversations. I'm sure those conversations get very personal, um, you hear a lot of stories, uh, from employees. Um, and according to a recent survey, six out of 10 workers in the U.S. say preparing for retirement causes them stress. So now we're speaking to business owners, business leaders, what advice or thoughts do you have for them as it goes to helping their employees feel more prepared and less stress about retirement?
Jim Myers:
I always say that saving for retirement is like every other resolution that we put off until someday, where the sooner we can start, the less of a sacrifice it has to be later. And anytime we have changed in our life, change causes stress. And so as an employer, if we can help that participant be a little bit more prepared for retirement, all that helps. And I go back to the match that I talked about earlier. If the employer can offer a generous match to help that participant feel a little bit more prepared, I think that would greatly help.
Another very innovative idea that I've seen that's been very effective is for employers to bring in experts in the field that helped with different topics, such as Social Security or Medicare, or even bring in a mentor of recently retired employees that help those participants and kinda share their experiences. How do they spend their time in retirement? I think that helps the participants become less stressed about what retirement will look like for them.
Mark Meloy:
That's great. Great thoughts. And- and a really good idea is I, myself, um, get closer and closer to that retirement thing. Brendan for you, what are the recommended components of an ongoing employee education effort?
Brendan Freeman:
Sure. Just following up on that last piece, that- that idea of having a mentor, someone who's 10 years ahead of you and you can learn from their mistakes, it's invaluable, it's invaluable. So maybe, Mark, you need a mentor. Uh, in terms of education plans, um, and- and really what works, I think it's a consistent voice more than anything. Uh, you want that consistent voice to be someone like- like Jim or, you know, someone from our team that's there having one-on-one discussions, having group discussions, kind of keeping at top of mind.
You know, that could be quarterly, that could be semi-annually whatever, uh, you know, our plan sponsors or the companies that we work with want, I think that consistency and that strong presence that matters. I've found over time that even though in today's day and age we're all so reliant on technology, you know, we can access balances anywhere on our phones, on our iPads, that kind of thing. Uh, we can get information very quickly, uh, in a way that we- we couldn't do, you know, years and years ago, when it comes to important decisions, I've found that people still like to talk to an individual and they want really good advice.
And so sitting down, having those types of discussions around retirement, around, you know, is there a shortfall? Is there an excess? What is that gonna look like? What does that plan look like? That's a valuable thing from an education perspective. We have lots of different ways that we can get information to our plan participants, but for those important decisions, that face-to-face or that- that one-on-one really, really matters. The key for any employer or plan sponsor is that you wanna make sure that you're meeting your employees where they are. And so if you have Spanish speaking employees, make sure that, uh, you have those resources available, uh, to kind of meet them where they are. So, uh, those are some of the components, I think, for, uh, a valuable education plan.
Mark Meloy:
Jim, have you seen any innovative employee education campaigns for retirement?
Jim Myers:
Each different provider has just fantastic online tools. And so I would, I would really encourage the participants to go online and- and really own their own retirement, you know, just own it themselves. And Brendan alluded to it earlier where about 10 years ago, there was a fantastic ad campaign, what is your number? And as Brendan indicated, the industry has gone away from that more towards what is your monthly stream of income going to look like? And these different online tools and calculators will- will help you tell you just that. You know, a million dollars is a lot of money to somebody, but when you can break that down, that equals $6,200 a month. That's a lot more of a real number that a participant can use for their own personal budget.
Mark Meloy:
Good. Brendan, an important step in saving for retirement is figuring out how much you'll need. Get only about half of all workers who report that they tried to calculate that number. I know there are eight and 10 say it would be helpful if their employer help them determine how much they need to retire. How do you suggest employers go about that?
Brendan Freeman:
Well, as Jim just was talking about, you know, it is, it is that income stream and the calculations are really what matter. And so if you're an employer, what are you making available to your employees in terms of calculators? Uh, in terms of the sites that are available through the, uh, the provider you work with or in terms of other outside resources that will help in those calculations?
You know, one of the- the litmus test is that we often talk about is could you live on a set amount and, you know, maybe if you're five, 10 years before retirement, and you're bringing home a certain dollar amount, say you're bringing home $5,000 a month after taxes, could your investments, uh, three and a half percent annual return that you're pulling out, which is kind of a, that's- that number three and a half percent is- is often used from a withdrawal perspective. A three and a half percent, is that gonna generate after tax that $5,000 that you need to live on a monthly basis? Or do you need to save more?
A lot of these 401(k) plans and a lot of individuals that are getting closer to retirement start to accelerate how much they're putting into their plan. Do you need to do that to be able to- to meet that amount of money, uh, required in retirement? And so doing those calculations kinda, doing that litmus test of based on what I have, what it work, and if not, what do I need to do to get on track? That's what employers should be talking about, that's the type of thing that we talk about all the time, Mark.
Mark Meloy:
Hey Jim, in a recent Glassdoor survey, respondents ages 18 to 44 said they prefer benefits more than pay raises and 31% specifically cited retirement plans or pensions. Do you think the younger generations are more motivated to save for retirement than were the prior generations?
Jim Myers:
I really do, Mark. I- I think that the younger generation is more educated on this topic at an earlier age, although they may be misled regarding some perceptions of Social Security and whether that will be there or not for them, but I've believed that the younger generation has really taken a stance that no one is gonna look out for themselves except them. And in the last 50 years, there has been a big cultural shift from a defined benefits package, which would include a pension to more of a defined contribution benefit, which would include your 401(k). So some of these younger participants don't even know what a pension is, and they don't think that Social Security will be there for them. So they're really investing a lot into their own future and their own 401(k).
Mark Meloy:
Thanks, Jim. Okay, Brendan, let's talk about ourselves a little bit here. Talk about how First Business Banks retirement plan team differentiates itself from other providers.
Brendan Freeman:
Absolutely. Thank you, Mark. Uh, you know, I love talking about this team, uh, 'cause I know the quality of the work that we do. Um, as we've talked about throughout this podcast, a big component is education and really having that consistent voice, being there to work directly with 401(k) participants and challenge them, uh, educate them, challenge them and- and encourage them to do more for their retirement. They'll be happier down the road, and that makes a huge difference.
Part of that is having a presence, uh, sometimes that might be a face-to-face presence, uh, in a individual one-on-one meeting, it might be in a group meeting, it might be a video chat where we're talking, uh, directly with participants or we're talking with groups of participants. I think that presence matters. Plan design is another element where sometimes the plan might be geared really for the benefit of the owners and that's okay.
So other situations, it- it really reflects the need to retain and attract great talent. And so it's- it's meant to be very competitive compared to others in the industry, that kind of thing. We wanna work directly with our companies, our plan sponsors to make sure we're getting it right in terms of what the- the plan needs to accomplish, uh, for how they're growing, how they're changing, how things are evolving.
Um, and then the last thing, and I think this is consistent throughout First Business Bank, and I think it's really important and it's really one of the key differentiators is we- we wanna get it right. We absolutely wanna make an impact on our clients, uh, that matters to us, that matters to our clients. And so I think that idea of getting it right and making an impact, uh, in this situation, making a huge impact on the employees, their families, you know, their livelihoods, their hopes, their dreams into retirement, that's what gets us out of bed every day, and that's what gets us excited. And so I think that's what makes us different, I think that's why, uh, we're a great partner oftentimes, and if you're not utilizing our services today, we- we'd love to have a conversation with you about it.
Mark Meloy:
Yeah. I know you guys are a team of really strong professionals. You guys do a great job, I've seen it time after time after time. I get nothing but great comments from our business leader, clients from, uh, employee groups in general. It's something that I am really, really proud of and love to talk about. Brendan and Jim, thanks so much for taking time to share your thoughts and experiences with our audience today. And to our audience, thanks for listening to the conversation. We hope you found this topic helpful, and you can leverage the advantages of your company's 401(k) plan, attracting and retaining the best employees. Thanks, and we'll see you again on the First Business Bank Podcast.
Speaker 1:
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