Even the least-prepared of your retirement plan participants can find ways to improve their retirement outcome
Don’t look now, but there’s a retirement crisis occurring in
According to the Economic Policy Institute (EPI), most
families – including those at or near retirement – have little or no retirement
savings. EPI reports that the median values in retirement savings for all age
groups range from $480 for those in their mid-thirties to $17,000 for families
nearing retirement in 2013.
Blame a recession for some of that pain, as retirement
savings accounts took huge hits. Still, some of decline can be attributed to
cuts in employer contributions. According to a Willis Towers Watson study, employers
slashed their contributions to employees’ retirement plans by one-quarter from
2011-2015. The reason: a decline in the traditional defined-benefit plans in
favor of more affordable 401(k) plans.
So how are retirement advisors going to help plan
participants close that gap?
Do the math. The
easiest way to get retirement plan participants thinking hard about their
retirement savings is to show them their financial fitness. Use retirement
calculators to show participants how much their current contributions and
Social Security payments will total at their intended retirement age.
Track spending and
debt. Your participant loves buying sports cars, but his debt is such that
it could well be impacting his retirement savings trying to pay off loans and
credit card accounts post-retirement. Devise a simple worksheet that shows
debts alongside discretionary spending habits, and educate participants on what
those debts would look like if one spending habit was reduced or eliminated.
Increase automatic deductions.
Payroll deductions are not just for paying bills. Talk with your plan
participants about using this method as a way to pump up the savings and
retirement accounts. Use the example of annual raises. How much would your
participant miss a one-percent payroll deduction if he is receiving a
three-percent raise every year? Show your participants what retirement and
savings accounts look like after ten years of incremental one-percent increases
In some cases, your participants may be able to work one more year in order to
capture that much more savings. Particularly if the employer is matching
contributions, this could be a good strategy for boosting retirement account
allocation. Participants should review their fund mix regularly, particularly
post-recession. Are assets being allocated in the best possible way? Is your
participant taking a conservative approach when she could benefit from a more
aggressive one? Is that employee nearing retirement taking too many risks with
allocation at a time when he should be looking for a less risky strategy?
Particularly for older workers, that four-bedroom house could be swapped for a
two-bedroom house, that extra car sold, the mortgage refinanced at a lower
interest rate, and higher interest credit cards paid down first. Give your
participants options for reducing their expenditures and show them their
expected savings per year for doing so. Then encourage them to reroute that
savings into retirement investments.
Retirement plan advisors can help participants close the retirement gap left by recession or a lack of adequate planning. By showing participants their savings, expenditures and retirement goals alongside one another, advisors can help employees understand the impact their current habits have on their retirement years. Armed with that information, plan participants can then build a retirement strategy that helps them make the most of their earning years.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.get xpress proposal