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A New Way to Prepare Employees for Retirement Plays to 401k Plan Sponsors’ Strengths

A New Way to Prepare Employees for Retirement Plays to 401k Plan Sponsors’ Strengths
September 24
00:03 2019

If you ask the typical 401k plan sponsor to establish an employee education curriculum for retirement readiness, you’re likely to get a blank stare. But, what if you used a classic technique from behavioral finance? Could you then get them to not only break their silences, but change those blank stares into twinkles of excitement riveted by true passion?

You can. In fact, the method is so simple that many are wondering why they didn’t start doing this earlier.

What is this new way, how did it start, and why is it becoming so popular?

You’ll need to remember your basics of behavioral finance to appreciate how this method rose to prominence.

Recall the initial question: Can a typical 401k plan sponsor create an educational curriculum to allow employees to achieve retirement readiness? Most 401k plan sponsors are not educators, question whether they themselves are ready for retirement, and are generally too busy to run their business to take up the challenge of employee education.

Now imagine asking this question: Would the owner or business executive see the benefit of creating a training program that will help workers run the business better – more efficiently, more profitably – and make it more sustainable over the long-term?

What executive would turn down this offer? Who among 401k plan sponsors can’t see how such a training program might benefit their business?

Alas, what employee would bother to attend such as session?

Here’s the trick, and the beauty of this new method. It is the behavioral finance applied perfectly. It’s called “reframing” and it works amazing well when used correctly.

Notice how the initial question to the plan sponsor was reframed from employee retirement education to employee business training. This is a shift that can excite the plan sponsor.

To excite the employee, the “training program” needs to be reframed again. This time, it’s defined in terms of retirement. This is how to do it:

Retiring is like starting a business. In fact, it’s a little easier. (More on that in a moment.)

In both cases, it’s all about long-term sustainability. Retirees want to spend the rest of their lives in financial comfort. In the same way, entrepreneurs want to build a business that remains financially viable for years to come.

Think of the similarity between the retiree and the entrepreneur. Both are “leaving behind the safety and security of a regular paycheck,” says Urban Adams, Dynamic Wealth Advisors, Investment Advisor, Orange County, California. “Your time is even more your own, but income (profitability) can vary from year to year.”

Where the money comes from and where it will be going represents an important consideration whether you’re about to start retirement or start a new business. Josh Bennett, CFP, Founder of Vincere Wealth Management, San Francisco, California, says to “focus on cash flow. Both business and retirement rely heavily on projecting cash flows. You need adequate funding to meet cash flow needs in either scenario and you need to plan for events that could disrupt your cash flows.”

While cash flow is critical in both situations, there’s a first step that is nearly identical. Successful business plans share the components as a successful retirement plan.

“The first thing you do when writing a business plan is establish a goal, says Raul Elizalde, president and chief investment advisor of Path Financial LLC, based in Sarasota, Florida. “But a goal has to be specific, measurable, and realistic. A fuzzy goal such as ‘create a successful company’ doesn’t cut it. What defines success? How would you measure its progress? Is it something that you can achieve with resources you have or can plausibly obtain?”

“Likewise, continues Elizalde, “‘have a comfortable retirement’ is a largely useless objective. Do you want to satisfy basic survival objectives or leave an inheritance to your family, or money to a cause? How will you monitor whether you remain on track as time goes by? Is it possible to attain those goals with the financial assets you have when you retire, or do you need to work longer and save more in order to achieve them?”

1239083_64651044_e-commerce_hand_stock_xchng_royalty_free_230 “TODAY’S 401K EDUCATION MEETING PROCESS IS A FARCE.”



The basic framework of planning is surprisingly the same. Austin S. Lilling, Esq., Partner-Executive Compensation and Employee Benefits at Stroock & Stroock & Lavan LLP in New York City, says, “The similarities between preparing for retirement and creating a business plan include:  (i) seeing a vision for your retirement and future business, (ii) setting short term and long term goals to achieve the vision, and (iii) executing, and sometimes modifying along the way, your plans to achieve those goals.  All these require substantial thought and testing so as to position yourself to achieve the best results.”

Anyone who has executed a successful business plan realizes the importance of not waiting. The “ready, fire, aim” attitude allows for progress even when uncertainty remains. “In both preparing to start a business and preparing for retirement the most important thing is to get going!” says Betty Mooney, President & Finance Officer at Brick Restoration, Inc., in Houston, Texas. “Do it now, don’t wait until the plan is perfect, or you know exactly how to execute, because you may find you’ve lost valuable time for growth.

Moving ahead before you find perfection better prepares the entrepreneur and the retiree for the inevitable slings and arrows of outrageous fortune. “In both cases, you want to create a plan that is as specific as possible, while also leaving room for the unexpected,” says Arielle O’Shea, Retirement & Investment Specialist at NerdWallet in Charlottesville, Virginia. “Whether you’re retired or starting a business, you’re going to run into bumps, whether that means an unexpected or sudden expense or a bad stretch. (In business, that might mean sales are down. In retirement, that might mean the market is down and your investments aren’t returning what you expected.)”

Company executives know how to run a business. It excites them. It delights them. It’s something they’d love to share. If plan sponsors can train their employees to use these same tactics for their retirement, they’ll be more likely to practice those tactics at work. And that’s good for business.

In fact, it may also be good for retirement – and in a way that may not immediately come to mind. “On the other hand, people face decades in retirement and many of them are quite young and active,” says Dan Danford, CEO/Principal of Family Investment Center in Saint Joseph, Missouri. “If they have the time and energy, and a great idea, starting a business can be a great way to meet both personal and professional goals!”

Christopher Carosa is a keynote speaker, journalist, and the author of  401(k) Fiduciary SolutionsHey! What’s My Number? How to Improve the Odds You Will Retire in Comfort, From Cradle to Retirement: The Child IRA, and several other books on innovative retirement solutions, practical business tips, and the history of the wonderful Western New York region. Follow him on TwitterFacebook, and LinkedIn.

Mr. Carosa is available for keynote speaking engagements, especially in venues located in the Northeast, MidAtantic and Midwestern regions of the United States and in the Toronto region of Canada.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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