Sample 401K Communication to Employees: A Template for HR Leaders

Originally published 3/5/21, updated 6/21/23.

Unless you’re a financial expert or HR professional, figuring out retirement plans is no walk in the park. 401Ks, IRAs, compounding interest, employer matching—it’s enough to make the average employee’s head spin.

Over the last few years, employees investing in their 401k have seen a negative impact on their accounts. The economic and market instability resulted in an average decrease in account balances of 20% (oof). So offering smart 401K advice for employees is an especially important part of helping your employees recover from a challenging year and set their eyes on longer-term financial goals.

But how do you make sure your benefits communication strategy is up to par? We’re sharing some sample 401K communication to employees that you can use to get your message across.

All 401K tips are not created equal

If you’re encouraging all your employees to put as much as they can into their 401(k), I hate to break it to you, but you may be causing more harm than good.

Think about it—your employees are unique people at different stages of life with their own needs, life circumstances, and goals. Some are closer to retirement than others, some have a larger savings safety net than others, and some have more pressing upcoming expenses than others. We have five generations in the workplace and are seeing older generations stay there longer because they don’t have enough saved for retirement—the median 401k balance is $35,345.

For exactly that reason, it’s important to make sure you go beyond encouraging higher and higher 401(k) contributions (which only some employees can manage) and, instead, meet your entire workforce where it is—with more empathetic, targeted, holistic financial guidance.

So what does this look like?

Well, in an ideal world, you’d be able to pair up every one of your employees with a savvy and charming financial guru who could look at their unique financial situation, and give tailored recommendations on how they should be spending their free dollars–i.e. money left over after basic living expenses are covered. And there is a tool that can make that happen.

But if you’re looking to get started now, you can still significantly improve the usefulness of your 401K communications by highlighting a few different employee personas, and giving financial advice for each one. As a result, your employees can latch on to the situation closest to their own, and feel more confident in their choices.

Sample 401K Communication to Employees

Here’s what this kind of targeted advice might look like in an email you send to your workforce. (Feel free to copy-paste…we won’t tell.)

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Subject line: Let’s get smarter about 401K savings

Hi team,

Putting money away for your retirement is important, but how important depends on the financial boat you’re in. Here are a few different scenarios you might find yourself in, and some advice for how to approach your 401K.

Example #1: Joan, the Prepared

Joan has a few thousand dollars saved for emergencies and no high-interest credit card debt. So, for Joan, it makes sense to fund her 401K up to the company match and beyond, as much as she can afford.

Why? Her short-term financial situation is secure, so she’s in a position to focus on her long-term goals. (For context, the average 401K contribution in 2022 was 13.7%. Pretty good! But most advisors suggest putting away 15-20% of your paycheck if you can.)

Example #2: Dave, Who Has No Emergency Fund

Dave lives paycheck to paycheck and doesn’t yet have an emergency fund. For Dave, it would make more sense to set money aside for that before he puts money into his 401K, even if his company offers a match.

Why? If Dave finds himself suddenly having to pay for something unexpected (like a broken transmission or a flooded basement) and doesn’t have cash saved up, his options for paying off this bill are to a) raid his existing 401K funds and pay a penalty, (b) take out a loan against his account, reducing his after-tax pay by paying back principle and interest, or (c) use a high-interest credit card.

All of these options would result in him losing money beyond the cost of the surprise expense. Not great for Dave!

Example #3: Greg, Who’s Got a Safety Net, But Who’s Saddled With Lots of High-Interest Debt

Since Greg has an emergency fund in place, it makes sense for him to fund his 401K until his employer match is reached. He just can’t beat a 100% return on his money.

But since he has high-interest credit card debt, Greg probably shouldn’t contribute any more money to his 401K beyond the match until his debt is repaid.

Why? He would lose more money than he’d gain if still carrying that debt. Specifically, his 401(k)-related gains–7%-9% annually, on average–would most likely be less than the losses he would take on his credit card, let’s say, 13%-17%.

These are just a few quick tips. Have questions about managing your own 401K? Reach out to our team any time to chat!

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After you’ve educated your employees, make it easy for them to take action

You could add the examples above into your general 401K messaging and call it a day. But why stop there? If you’re truly invested in helping your employees not only plan for retirement, but also create savings and dig out of debt, offer education in the moments that matter:

Reiterate your 401K messaging whenever employees get a raise, bonus, or promotion

There’s no better time to talk about what to do with your ‘free dollars’ than when an employee has just landed more free dollars, courtesy of payroll. Put together educational materials when employees get a raise, and remind them that now’s a good time to up their contribution if they can.

Share links to reputable personal finance blogs and podcasts

Here are just a few of our favorites:

Blogs

• Get Rich Slowly. Great for personal finance beginners; reviews personal finance books and products.
• The Simple Dollar. Especially useful for people trying to get out of debt; provides guidance on how to set up an emergency fund.
• Investopedia. Features articles, tools and simulators for the novice investor.
• Mr. Money Mustache. Provides practical advice on how to live frugally and achieve financial freedom; particularly popular with Millennials.

Podcasts

• Millennial Money. Hosted by a certified financial planner; helps people just getting started set themselves up for financial success.
• Money Girl’s Quick and Dirty Tips for a Richer Life. Each twelve-minute episode offers advice that can put into action immediately.
• The Rich Dad Radio Show. Hosted by the author of Rich Dad, Poor Dad; offers advice on how to grow wealth slowly and predictably.

Bonus tip: Don’t just send all these links in a one-time email. Remind your employees about these resources regularly by highlighting a single resource every month. The more visibility you give them, the more likely your employees will dig in.

Highlight apps that put savings on autopilot

In the same way 401(k)s use automated deposits to make retirement savings easy for employees, mobile apps like Acorns, Robinhood, Stash, Oportun, and Tally use automation to help people build emergency savings funds, pay down credit card debt, and invest in smart, manageable, and automatic ways.

Making your employees aware of these tools doesn’t guarantee they’ll use them, of course. But it will show that you have their best interests in mind–which, when it comes to creating change, is half the battle.

(A version of this article appeared in Plan Sponsor magazine in February 2018.)