Due to the uncertainty surrounding the solvency of Social Security and the decreasing number of workers being covered by traditional pension plans, the need for effective retirement financial planning has never been more important to employers and employees alike.

Most financial experts agree that the effectiveness of a financial plan is greatly influenced by how financially literate a person is or isn't. Being financially literate means that a person has the understanding, knowledge, and skills necessary to make informed and effective decisions on their financial matters. Employers can help improve the financial literacy of their employees by offering financial education programs in the workplace.

A financial education program can cover a wide range of topics, such as general information about current economic conditions, general financial market information, the basics of investing, and in-depth information on the company's retirement plan. This educational information can be offered using various formats, such as interactive online programs or email correspondence; in-service or enrollment meetings; newsletters, worksheets, or paycheck stuffing; and seminars. Just by looking at a few of the potential financial education areas and presentation options, it's fairly obvious that an employer can spend a lot or a little on a financial education program. Although the degree of cost will depend on the extent of the program, any program will have some cost associated with it. Of course, it's only natural that employers want to know what they and their employees are getting in return.


What research has been done on the subject trends toward there being higher voluntary retirement planning, such as a 401 (k) plan, participation and higher contribution rates among employees when their employer provides access to financial education.

One recent study by TIAA-CREF researchers focused on attendees of TIAA-CREF financial education seminars. Those in attendance were surveyed prior to attendance, immediately following attendance, and again three months later. Overall, the study suggested that people are likely to re-evaluate their lifetime consumption, work, savings, and retirement goals following the completion of a financial education program. The study's results also suggested that having a better understanding of the savings process and income needs for retirement can help encourage people to increase their rate of saving to achieve realistic retirement goals.

Immediately following the seminars, 91% said they expected to make some change to their retirement planning, with 20% expecting to make increases to their goals for retirement income and 7% expecting to raise their planned retirement age. The anticipated contribution increase was 15% on average. Of those surveyed without a current supplemental retirement plan, 41% said they planned to open one. Twenty-nine percent said they would either increase IRA contributions or open one.

The three month follow-up survey revealed that expected intentions don't always come to fruition, as some of those surveyed had failed to make their expected changes. Of those that expected to open a new retirement account, only 25% actually did it. Some said that financial constraints had prevented them from following through, but a third said they just didn't take the necessary steps to complete their expected changes.

In order to prevent the lapse between intention and action, the study suggested employers make it easier for workers to complete their goals by having the necessary paperwork available at seminars, time-friendly reminders on how to increase contributions, and so forth.

Financial education, or rather a lack there of, is an issue that extends beyond just money, as the resulting problems are likely stress inducers. Countless studies have suggested that financial stress and mismanagement is correlated to frequent absenteeism, excess use of health care resources, an increased number of accidents, a decrease in employee morale, and negative effects on worker commitment.

In closing, since financially secure employees tend to be less stressed, more productive, and better prepared for their financial future, the positive results of a financial education program clearly extend much further than just boosting plan participation.

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