3 Reasons Why You Need an Employee Retirement Plan

Plan Selection

You need a retirement plan for your ministry organization.

A retirement plan has many benefits for your organization and for your employees.

Here are some facts about retirement:

  • Your employees have to plan for 30 (or more) years of retirement.

  • They may need up to 80% of their current income to live in retirement.

  • Don’t rely on social security. The average monthly payment is $1,200.

Here are 3 Reasons Why You Need an Employee Retirement Plan

To attract new employees

1. When you have a retirement plan, it lets your staff know that you care.

2. It lets them know that you want to encourage them in their financial understanding and stewardship responsibility.

3. Those attracted to your mission/ministry are initially attracted by what you do and who you serve. But a retirement savings plan is also a huge incentive for anyone interesting in working for your ministry.

Many churches will not provide financial support to an individual working for a religious non-profit unless there is an adequate plan in place. “Adequate” is interpreted as meaning sufficient so that the person being supported can leave that support when they retire.

How a Retirement Plan Benefits Your Employees

  • Retirement contributions can cut down on their overall taxable income.

  • Contributions are typically tax-free until they are taken out during retirement.

  • It is easy to set up retirement plan contributions through payroll deductions.

  • It is easy to roll money over from employer to employer.

  • It sets them up for a successful retirement.

Most of us don’t understand percentages. If asked, many retirement plan participants will say they cannot afford to contribute even 1% or 2%. Then, when asked their salary, they say it is $48,000 per year and paid twice a month (24 times per year).

If you divide $48,000 by 24, it equals $2,000 per pay period. So, 1% of $2,000 calculates to be $20 per pay period. This small amount earning 6% for 20 years will produce about $300 per month at retirement. They went from can’t to can.

Educate your employees on the importance of starting now. However, if they start later, they can still make smart choices increasing the likelihood that they will retire with enough—and if not enough, at least more than they would have if they did not start at all.

Here is a great graph from irs.gov that shows the impact of saving.

Future retirement savings value.png

To retain new employees and staff

Higher salaries, internal pay equity, and group benefits are keys to employee satisfaction and retention. A well defined, impactful retirement plan shows your employees that you care.

When we examine the retention power of a retirement plan, that power is influenced by a number of factors:

  1. Is the information about the plan clear to the participant?

  2. Is the plan supported by an engaged sponsor or, is there never any reference to it?

  3. How is the plan designed? An employer contribution, no matter how small, a matching contribution, and volunteer option for all are keys to enhancing the value and adding retention power.

We are often amazed about how some plan sponsors treat their plan—almost as a necessary activity instead of a key portion of the ministry’s attraction and retention plan/strategy.

Further, if the plan is transportable (i.e. the employee can take it with them when they leave), they have the freedom to act, which, interestingly enough, increases the likelihood of them staying. An open palm has greater attraction than a clenched fist.

Clearly if the employee knows the value to them of the plan, and that the net result will be a Future Funded Ministry Plan in place, the attraction of staying is increased.

To retain key employees and staff

Unfortunately, many of us treat the retirement plan as a necessary program that only impacts the future and has little relevance to the present, except to drain assets that could be used for another purpose. We understand that saving for retirement impacts the futures of our employees, but we are often less clear about how this act impacts the present.

If we change to face a different financial direction, lives change. Translating needs into plans, learning the language of investing, taking personal responsibility for current and future circumstance, communicating with a spouse or significant other about money matters, deciding on what steps to take, and then following through are all important. You can accomplish this by implementing a retirement plan for your ministry.

So, where do you start?

You can create a successful retirement plan when these steps are in place:

  1. A solid, well-communicated plan design

  2. Best of class investments guided by an Investment Policy Statement

  3. An Oversight Committee that is focused on communicating and overseeing the plan

  4. The metrics and measurements of participant involvement are regularly reviewed

  5. Easily communicated basics and principles mentioned above are made available and put in front of participants

  6. Ministry leadership models the actions and attitudes necessary to manage a successful plan

To sum it up, you will retire; your employees will retire. Implementing a retirement plan for your ministry is important for you and for your employees.

Start now. However, if you start later, you can still make smart choices increasing the likelihood that you will retire with enough—and if not enough, at least more than you would have if you did not start at all.

Start by knowing what you should look for when choosing a retirement plan provider.

To design a new retirement plan tailored for your ministry, begin a custom proposal today!

Are you a Ministry Leader?

We have some great ways to promote Biblical Financial Stewardship to your staff.

To explore this, connect with us.