Millerwood Communications

In a Crisis, Manage the Grapevine

Reaching out to employees to communicate the importance of managing their 401(k) savings can be difficult when there is widespread panic. All anyone has to do is turn on the news to be reminded of the volatility in the market right now.

But there are steps employers can take to educate employees on how to manage their savings and alleviate some fears.

In addition to manager and general employee communications programs, you can use the grapevine.

The drivers of the grapevine are opinion leaders. These are the employees who have emerged as leaders within the organization, drive the culture and are well-connected with employees. These people can be found at all levels of the organization.

An effort can be made to identify this group and target messages with the intent that the information will informally get out to the masses.The group can be equipped with information on how to deal with  emotions that are running high and how to help employees seek additional resources and information.

And with tact, there is no need to create the medium. The grapevine already exists. It just needs the right message injected into it. 

Employee 401(k) Dialogue in a Wild Market

Today, employees are seeing the value in their 401(k) plans decreased by 20%, 30% or even 40% from just a month ago.

How do you address the fear this has created? 

To get employees thinking constructively about saving again, communications can begin to focus on three main areas:

• Think Before You Take. Thoroughly evaluate the benefits and consequences of taking money out of the 401(k) plan. First, all withdrawals are subject to income tax and possibly a 10% early withdrawal penalty. Saving in a 401(k) is intended for use during retirement when income is reduced and tax brackets are lower. Second, when you take out money, you are selling stock, which means most likely you bought high and are selling low at a loss. 

• Consider Changing Your Asset Allocation for Future Contributions. Asset allocations should be based on years from retirement and the level of risk you want to take. If you feel that you are taking too much risk (investing in higher risk stock funds), then consider putting future allocations into a more conservative mix. You can always change your allocation in the future, as the plan allows. 

• Look at Your Personal Situation and Timing. When do you need your money? Is retirement only one or two years away? If you don't have time in the market to regain your losses, you need to make decisions on your current investments. The option is to wait it out in the market, or cut your losses and move existing savings to more conservative funds in the plan.

You want your employees to sleep at night, and directing them to take a role in their savings may empower them and remove the helpless feelings this economic crises has created.