Personalizing Retirement Communications Based on Life Events

December 2019

By Wendy Schmitz and Beth Garner

Many employers are looking to reinvent their benefit strategies by coming up with new forms of retirement, financial wellness, and health benefits to better meet the needs of their workforces. While developing new types of benefits may certainly help increase employee engagement and satisfaction, rethinking the way information about existing benefits is communicated to employees can make a powerful impact as well.
 
One way to do this is by personalizing your messages to employees. Your workforce likely comprises a broad range of age groups—from baby boomers close to retirement to Gen Z in their first job. Rather than sending the same message to all employees, you could tailor the message to focus on what is likely to be most relevant to that life stage.
 
Furthermore, you could personalize the communications based on specific life events. Here we will review how plan sponsors could use major life events—such as birthdays, promotions, and changes in family situations—to reach out to employees and educate them on opportunities to adjust their retirement savings strategies and strengthen their overall financial plans.
 

Life Events: Known vs. Unknown

There are certain life events that plan sponsors will automatically know based on information currently in the employee database. These events can be triggers for sending personalized messages detailing how the employee might consider adjusting their retirement savings based on that milestone:
  • Birthdays: Certain birthdays trigger eligibility for additional retirement benefits. For example, at age 50, employees can make catch-up contributions to their 401(k) and Individual Retirement Accounts (IRAs). Additionally, employees are eligible for tax-free distributions from their retirement accounts at age 59 ½. Plan sponsors should consider sending messages well in advance of the birthday to educate the employee on these upcoming changes.
  • Promotions: HR usually gets notified when an employee is promoted or earns certain licenses that typically lead to a promotion. Plan sponsors can use this as an opportunity to remind employees of how getting a raise in salary can be an ideal time to consider increasing their retirement contributions or review their overall retirement strategy.
 
In addition to these easy-to-track milestones, employees experience other life events that plan sponsors may not automatically know about. Regardless, plan sponsors should be prepared with helpful information in case the employee asks for help understanding how the event could affect their retirement strategy and overall financial goals. These life events include:
  • Having a baby: New parents will want to review their insurance coverage and retirement savings in light of their growing family. This also might be a good time to send information about starting a 529 plan or other college savings fund.
  • Marriage: Marriage is a great celebration of love and a time to combine resources.  Employees will need extra help determining heath benefits required and retirement savings strategy for this now party of two.
  • Divorce: Divorce can be tough. Help your employees adjust to the single life. This is another time when employees may have many questions about changing their benefit selections and/or revising their retirement strategy.
  • Buying a first home: Employees may not realize that they can withdraw up to $10,000 from their IRA penalty free before age 59 ½ for qualified first-time home purchases. The Internal Revenue Service (IRS) website provides additional information about these types of withdrawals and other exceptions to the tax on early distributions. Perhaps a 401(k) loan is a good option to think about when considering a down payment on a home.
  • Teen’s first job: Your employees may not realize that when their kids begin earning income (possibly as teenagers), these teens are eligible to contribute to a Roth or traditional IRA. You can help your employees by teaching them about this strategy for getting their kids off to a strong start in their retirement savings.
  • Kids starting college: Employees may be able to take loans from their 401(k) to pay for college expenses. Another option that some plans allow is to take a hardship withdrawal from the 401(k) plan; it is important, however, for employees to understand that there are taxes and penalties associated with hardship withdrawals if taken before age 59 ½. Again, the IRS website explains the tax effects for using 401(k) assets for college expenses.
  • Hardship distributions: Many plans allow participants to withdraw assets under many other situations. The IRS website has useful information explaining the tax issues involved with doing this.
 

BDO Insight: Know Your Workforce’s Touchpoints

Plan sponsors don’t have an easy job in gaining the attention of employees when it comes to saving for retirement. Baby boomers might be more engaged because they are on the cusp of retirement, but Gen Z workers might simply be trying to figure out how to save enough for a down payment on their first home. All workers, regardless of age, are constantly being bombarded with messages through email, social media, billboards and other channels throughout their daily lives.
 
One way to cut through the noise and get your employees’ attention in this highly competitive messaging environment is by personalizing the message. It is relatively easy to do this for milestones like birthdays and promotions. But even if the employer doesn’t have immediate knowledge of the life event, the employer can still have prepackaged information available to distribute when they find out about these milestones.
 
Targeted, personal benefits communications can engage employees and help plan sponsors achieve their benefit program goals. Your BDO representative can help review the particulars of your plan to help reinvent your benefit strategies.
 

CONTACT
 
Beth Garner
Assurance Partner
National Practice Leader, Employee Benefit Plan Audits
Wendy Schmitz
Assurance Director, Atlantic Region Practice Leader