Leverage DEI, Combat Retirement Anxiety, Gain A Strategic Advantage

Here Are the Facts

• 47% of employees who make at least $200,000 have saved enough for retirement.
• 34% of employees who make between $100,000 and $190,000 have saved enough for retirement.
• 20% of employees who make between $50,000 and $99,000 have saved enough for retirement.
• 12% of employees who make less than $50,000 have saved enough for retirement.

And because lower-income earners have fewer funds left over to save for retirement, they also participate less in employer-sponsored retirement plans, so they rely more on Social Security. That is:

• 52% of employees who make less than $50,000 plan to rely on Social Security for retirement.
• 34% of employees who make between $50,000 and $99,000 plan to rely on Social Security for retirement.
• 20% of employees who make between $100,000 and $190,000 plan to rely on Social Security for retirement.
• 9% of employees earning at least $200,000 plan to rely on Social Security for retirement.

Additionally,

• Only 59% of employees use employer-managed retirement plans.
• 85% of individuals in the $100,000- and $ 199,000 income brackets participate in an employer-managed retirement plan.
• 76% of individuals in the $50,000- and $ 99,000 income brackets participate in an employer-managed retirement plan.
• The comfortable retirement magic number is $1.27 million.

This shows that individuals participate in retirement plans as their income increases. So, the lower the income, the less likely individuals are to save for retirement. And the problem with this finding is that demographic disparities put certain individuals at risk of leaving work without secure retirement savings. Why is that?

Here's an Excellent Example

Men have a better chance of reaching the retirement magic number because they are technically paid more than women for the same position. For instance, the median household income for women is $59,000, while for men it is $82,000.

That is why, on average, women still at work have about $20,000 in retirement contributions, while men have about $70,000 in retirement contributions.  And suppose you look at the wage gap between individuals in rural areas and those in urban centers. In that case, rural workers tend to have lower household incomes (While 27% of urban workers are confident they can retire comfortably, only 17% of rural workers can say the same).

But Why DEI?

Many employees from marginalized communities face systemic barriers to financial stability, including lower average incomes, higher unemployment rates, and less access to financial education. DEI initiatives focusing on equitable pay, promotion practices, and access to financial planning resources can help level the playing field, allowing these employees to contribute more towards retirement.

Also, different groups have varying levels of trust in financial institutions and knowledge about retirement planning. Tailored financial wellness programs that respect cultural nuances and provide education in accessible formats can empower employees with the knowledge they need to make informed retirement planning decisions.

Remember, too, that traditional retirement plans might not meet the needs of all employees. For instance, some might prefer investments in ethical funds, while others might value plans that allow for early withdrawals in cases of financial hardship without penalties. Designing retirement benefits with diverse needs in mind ensures that more employees can participate meaningfully in these plans.

How to Turn This into a Competitive Advantage

Start with benefits education. 9 in 10 of your employees want to understand their employee benefits and how they can utilize them, especially for retirement purposes. And they want their managers to be involved in the educational process.

Include training courses on savings investments for every employee in the organization regardless of rank – diversity without inclusion is a waste of time. Give your employees insight into alternative savings streams. If you have an opportunity for overtime in your organization, distribute them equally.

You can also consider adding benefits like deferred annuity to act as an additional income stream for your employees, but only if it makes sense for your organization and bottom line. Another benefit option would be to pay off your employees' student loans or match their contributions.

Additionally, reinforce meaningful employment for your employees and expand your retirement package. Work on reducing the wage gap for your employees. Create a culture where women and men have the same probability of achieving secure retirement because they both have access to better pay, employee benefits plans, and wellness initiatives that meet the needs of both men and women.

For instance, you can provide paid leave days for caregiving or parenting since these are roles dominated by females, and they go unrecognized in the office. Review and enhance your employee benefits package to ensure it meets the needs of a diverse workforce, including health care, retirement plans, and wellness initiatives.

Continuously monitor the effectiveness of your strategies to reduce wage gaps and ensure equitable retirement security. Be prepared to adjust policies as needed based on feedback and outcomes. Create channels for employees to provide feedback on pay equity, benefits, and workplace culture, ensuring their voices are heard and considered in decision-making.

But most of all, cultivate an organizational culture that values and respects diversity, encouraging input and participation from all employees. Actively increase diversity in leadership positions, reflecting the organization's commitment to equity and inclusion.

Some Initiatives to Consider

Targeted Support for Women:

Given the wage gap and career interruptions many women face due to caregiving responsibilities, DEI strategies can include specific measures such as catch-up contributions to retirement accounts for employees returning from parental leave, helping to mitigate the impact of time out of the workforce.



Support for Lower-Income Employees:

DEI policies that advocate for living wages and provide access to emergency savings accounts or low-cost loans can help lower-income employees manage financial emergencies without dipping into retirement savings, preserving these funds for their intended purpose.



Engagement and Representation in Retirement Planning:

Including employees from diverse backgrounds in discussions about benefits design ensures that retirement plans are more reflective of the entire workforce's needs. This representation can lead to higher engagement rates and greater ownership and satisfaction with retirement planning processes.



Conclusion

Creating a culture where women and men have equal opportunities for secure retirement requires ongoing effort, commitment, and willingness to change. By addressing wage gaps, enhancing benefits, and fostering an inclusive culture, employers can build a workplace where all employees have the tools and support they need to achieve financial well-being and security.

And if your employees are less worried about their finances, they will be more inclined to plan for their retirement savings and be more engaged and proactive within your organization. And guess what? DEI initiatives also make for an excellent top-talent attraction and retention strategy.

If you want to make your business more DEI-centred or enjoy a step-by-step guide on how to make your benefits package more DEI-focused, talk to us today.