Financial Wellness

Why People Aren't Prepared to Invest in a 401(k)

As the old practice of offering employees a pension plan for retirement has faded, it's been largely replaced by the rise of the employee-led 401(k). And as pensions disappear, American workers have begun to face the fact that most of their retirement outcome is in their own hands. Many are struggling to meet the challenge.

As a result of that shift, the idea of companies helping workers through a more holistic approach with their money has grown. After all, most companies are committed to giving their workers a good shot at a secure retirement. More and more employers now offer their employees some form of a financial wellness benefit.

But the precise meaning of financial wellness is sometimes vague in the corporate world. Most company leaders know how important retirement planning is for their employees, and many also realize how stagnant participation has been in 401(k)s-there's a gap between goals and behaviors.

So what does true financial wellness look like? And how does it connect with investment (or lack of investment) in your company's retirement plan?

Connecting Ideas and Behavior

Most of your employees already know the right things to do with money: avoid and reduce debt, spend less than they earn, and save and invest for the future. Simple, right?

But knowing the right things to do with money is totally different from actually doing the right thing. In fact, doing the right things with your money can be really hard. A few sobering facts about the American worker's financial situation is all the proof you need:

  • 70 percent of your employees are living paycheck to paycheck. A $1,000 emergency would upset their whole world.
  • 24 percent of their income is going out the door to consumer debt payments.
  • Half of them have $10,000 or less saved for retirement.

These problems can't be solved with the few financial lectures or educational lunches most companies consider to be the foundation of their financial wellness programs. Besides, who wants to discuss how broke you are with your coworkers?

The fact is, these statistics are a symptom of a much deeper problem your employees are facing. With the right approach to financial wellness, you can help your team solve this problem for themselves, enabling them to increase their 401(k) investments and find true financial wellness.

It's Not All in Your Head

The real reason for your employees' money problems is behavior-a failure to handle their money the way they already know they should. That's why we say 20 percent of good personal finance is based on head knowledge. The other 80 percent of anyone's success with money flows from their behavior.

To help your team bridge the gap between what they know they should be doing and actually putting those beliefs into practice, provide a financial wellness plan that focuses on behavior.

Holistic Helps Employees and Whole Companies to Win

If you want to see enrollment and savings rates in your 401(k) plan take off like never before, you need to understand the big-picture impact of financial wellness. Realize that your employees' work life can't be realistically separated from their money struggles.

Employees who get out of debt are less distracted and can focus on getting more done at work. People who are winning financially find it easier to achieve a healthy work-life balance. And the companies who employ them see overall higher productivity, lower turnover and reduced healthcare costs. That's a win-win situation for both the worker and the entire organization-a true picture of financial wellness.

About the Author

Brian Hamilton is the vice president of Financial Wellness for Ramsey Solutions. For more information, visit

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