The Top 3 Reasons Employees Don’t Invest in 401k

by | 27 Jun, 2017

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Every 401k investor hopes to make a return. That doesn’t mean everyone has the same reasons for participating in a plan. Whereas employees on the higher end of the pay scale may be looking for ways to enhance their wealth, those toward the lower end are often making sacrifices in the present for the sake of an independent future.

Plan managers that want to increase participation rates should provide education that illustrates how those on tighter budgets can pave their roads to retirement one paycheck at a time. Without it, those on the lower end of the pay scale sometimes find it easier to put off retirement savings for years at a time.

Here are 3 common misconceptions some employees have about 401k’s that owners can overcome through investment education:

  1. ‘I Just Don’t Have the Money’

For many, when, where and how to invest their money is a problem. But for some, just being able to invest is a more immediate one. Standards of living are no lower for lesser earners, who while living from paycheck to paycheck can lose sight of large future returns under the everyday pressures of managing a budget for food, shelter and maintenance of a minimal lifestyle.

Talking about money is often discouraged in workplaces, but maintaining the fiction that every employee has the same ability to invest can cause misunderstandings among lower earners. Companies willing to address how employees can work investment into their budgets can dispel the notion that the 401k is just there to help those with extra money lying around.

  1. ‘The Future is Far Away’

Making an investment means giving up something you have in the present in the hopes of getting more in the future. The less you earn, the easier it is to put off that pain until tomorrow. Yet every day that goes by is less important to the long-term investor than the one that came before.

That’s because lower-wage earners must make a good return on their investments over the course of decades to retire comfortably. Today’s small investment will make much more money than tomorrow’s big one, and so the best time to invest is always now.

Tom DiSilva
Tom DiSilva has been providing professional human resource services for over 30 years. As the CEO of Navigate PEO, he actively partners with organizations of all sizes in the Greater New England area and across the country to help their businesses grow. He has expertise in HR and Labor Management, offering guidance and support for key areas of business such as negotiations, operations management, employee coaching, and employee benefits design. He is an active member of The Society for Human Resource Management (SHRM), The National Association of Professional Employer Organizations (NAPEO), Professional Association of Co-Employers (PACE), and The American Payroll Association (APA). He is deeply committed to giving back to the community both personally and through Navigate Cares, which provides support for several nonprofit organizations such as the USO, The Boys & Girls Club, and the 3Point Foundation.

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Disclaimer: this article does not represent expert advice and is provided for informational purposes. Please get in touch if you would like expert HR advice.