Inflation is up, 401(k) balances are down. So how do we prepare workers for a secure retirement?

Higher prices don’t have to mean lower expectations for life after work.

October is winding down, marking the end of National Retirement Security Month. It’s a good opportunity to reflect on this challenging topic—one that’s felt even more challenging this year amid rising inflation.

Market turmoil throughout 2022 has caused sharp declines in 401(k) account balances, while rising prices have eroded the value of those assets. Workers will need to save even more for the future, yet higher everyday expenses have forced many people to cut their plan contributions to free up cash.

When present conditions are this daunting, it can be difficult to prioritize saving for the years ahead. So what can we, as employers, do now to help our employees have a more secure retirement?

Spread the risk, reap the reward

In the 1980s, when U.S. companies began replacing their traditional pension plans with 401(k)s, the burden of preparing for retirement shifted from employer to employee. But not entirely, as many companies are now discovering: Without enough savings, some older workers are simply not retiring, leading to higher disability costs for their employers and disrupting traditional workforce succession patterns.

To address this imbalance, some employers have taken advantage of current market conditions—ironically favorable for pension plans, thanks to rising interest rates—and opted to reopen frozen pensions or add a new hybrid option that combines the features of a pension and 401(k). This helps spread the risk between a company and its workers and has proven to be an effective recruitment and retention benefit.

Focus on education

For employer-sponsored 401(k) plans, education is essential. We must remind employees that markets go up and down, but that staying the course is the best strategy for building retirement savings. To help employees better understand the financial risks they may face in retirement, there are online tools that simplify retirement readiness into a single score. Adding a target-date fund option or automatic enrollment feature to the plan can also help improve participant outcomes and plan participation.

Companies can also encourage prospective retirees to think about how to budget for new expenses as they age, such as healthcare. These costs can reach up to $300,000, according to Milliman’s 2022 Retiree Health Cost Index.

National Retirement Security Month is a good annual reminder that true retirement security comes from making choices throughout a career. Together, employers and their employees can set the foundation for healthy financial outcomes.