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First Step

This article accompanies Fiscal Fitness.

Monday, July 21, 2014
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As director of retirement benefits at Gates Corp., a global provider of advanced power-transmission and fluid-transfer solutions in Denver, John Barker says fewer than 4 percent of his company's 5,100 U.S. employees rely on financial experts.

Still, he points to a bigger problem: Employees -- including retirement-savings do-it-yourselfers, or DIYers -- aren't saving enough for retirement. So before encouraging them to seek investment advice, he says, HR needs to go back to square one, persuading them to save more so they can invest more.

While 94 percent of employees participate in Gates' 401(k) plan, the average savings rate is 5.3 percent. Last spring, Barker notified employees via a series of letters that -- after analyzing their current savings rate, compensation, Social Security income and other factors -- their retirement contribution would be automatically increased by 1 percent every year until reaching 8 percent. Then he introduced a new retirement tool from Bucks Consultants called Savings InSights, a powerful savings calculator and modeler designed to help employees better understand their financial status and plan for a secure retirement. So far, 6 percent are using the online tool.

Barker believes helping DIYers is a several-step process. HR first needs to educate them about retirement -- the benefits of starting to save more now -- and perhaps offer creative savings strategies. Then HR can direct them to financial experts who can help them make wise investment decisions and also teach them how to best use online financial tools.  Otherwise, DIYers may continue making poor choices and risky investments.

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"At the root of the issue, people may not fully understand or appreciate what it may take to retire," says Barker, adding that 42 percent of employees now invest in the company's four-year-old target-date fund. "So, before we focused on investment management and bringing in a lot of advisers, we really needed to start at the root and that is understanding savings and [what] it will take to have a good shot at retirement."

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