You, Too, Can Be a Member of the ‘Millionaires Club’

Jason Wilburn is a 24-year-old student-services coordinator for Red River Credit Union. He has been working for the Texarkana, Texas, company for about a year and has a little more than $3,000 in his 401(k) account.

Despite the amount in his 401(k), Wilburn is a member of the credit union’s “millionaires club,” which was set up by the credit union’s human resources department to encourage high savings in the organization’s retirement plan. Some experts suggest that accumulating $1 million by retirement is a goal to shoot for.

At the rate he is saving, Wilburn is confident he’ll have at least $1 million by the time he retires, if not more.

“At first I didn’t think that a 401(k) could provide me with $1 million,” Wilburn says. “I laughed when I first heard that. I thought you had to work and save on your own.”

After meeting with Red River’s human resources director, Wilburn decided he could afford to put about $80 pre-tax into his 401(k) each paycheck. He says it doesn’t really make a huge difference in his take-home pay; the amount is helping him get a generous match from his employer, and it’s getting him to save—something he knows he isn’t good at doing alone.

“I think people are afraid of saving,” Wilburn says. “When they get paid they want their paycheck—all of it. You just need to listen to good advice.”

Even with unemployment rates dropping and an improving economy, only 14 percent of American workers say they are confident they will have enough money to live comfortably in retirement, the Employee Benefit Research Institute’s 2012 Retirement Confidence Survey shows.

And although many American workers who responded to the survey aren’t confident about their ability to save enough and retire on time, experts agree there are things employers can do to boost workers’ retirement confidence.

“If you want to change these statistics in terms of how confident people are, it can be sobering, but it can be done,” says Luke Vandermillen, vice president of retirement and investment services for Principal Financial Group, one of the companies sponsoring EBRI’s research.

Red River HR director Karen Rhodes loves pulling out her slide ruler and showing employees that someday they can be millionaires—even if they have just a few thousand dollars in their 401(k) accounts at present.

She strives to help employees realize that no matter how much or how little they make everyone can save for retirement.

To be part of the Millionaire’s Club, employees need to contribute at least 8 percent of their salary to the company’s 401(k) plan. Right now, about 20 percent of the 180 employees are in the club. Many more are on their way, Rhodes says, adding that the plan has 100 percent participation and doesn’t automatically enroll or put employees into a default investment strategy.

It’s not fancy or overly sophisticated math, Rhodes says. Often, employees are withdrawing too much from their paycheck or are unaware of tax credits they can use to offset contributions to retirement accounts.

“Employers are not taking enough time to talk to their employees about this issue,” Rhodes says. They are “leaving it up to employees to figure it out for themselves, and that’s why so many [workers] have no confidence.”

EBRI’s survey results show several factors have a direct effect on retirement confidence. More than half, or 56 percent, of the respondents said they have not figured out how much they need to save. More than three-quarters, or 79 percent, say they have not talked to a professional investment adviser to evaluate their needs.

“If workers don’t know what they need to retire, it’s pretty hard to be confident about it,” says Craig Copeland, senior research associate at EBRI in Washington.

The 22nd annual survey, conducted in January, interviewed 1,003 workers and 259 retirees about their attitudes toward retirement and their preparations and confidence.

Respondents aren’t doing much to improve their situations. In 2009, about 75 percent of the respondents said they were saving for retirement. This year, that number dropped to 66 percent. Sixty percent of respondents reported having less than $25,000 in savings.

That’s why it is so important for employers to help employees make that change, Vandermillen says. Principal took data from EBRI’s survey and found that worker confidence in having enough savings to retire improved when certain factors changed.

Workers calculating retirement savings boosted confidence 64 percent. Those getting advice from a financial professional were 65 percent more confident about their retirement strategy, Principal data showed.

When employers offer these services, employees’ “outlook changes,” Vandermillen says. “People feel more empowered so their confidence and their results grow.”

Patti Kujawa is a freelance writer based in Milwaukee. To comment, email editors@workforce.com.