Supercharging the Investment Portfolio

Even in the best of scenarios, retirement plan participants could be doing everything right and still be missing their retirement income targets. Yet employer-sponsored retirement plans often accommodate a generalized portrait of its plan participants.

That becomes apparent when advisors are choosing plan options that speak to both millennials and Baby Boomers. The needs of each group can have some overlap, but the goals may be vastly different. Many advisors address these differences by offering tried-and-true investment options that can help all employee groups grow decent retirement reserves.

Still, there are ways for retirement advisors to help plan participants boost their portfolios within the confines of a group plan offering menu. Here are a few methods advisors can bring to the table:

Refocus energies: Retirement income is what matters to your plan participants, not so much a wealth of menu options. Fund ratings and reputations are important, but only in the context of how fund performance translates into retirement income. That’s where advisors can create real value for their clients. Help them think about retirement savings from an income perspective. Work with participants to get them planning for how much they want to have in monthly or annual income post-retirement, and they’ll be better positioned to choose their menu options wisely.

Help plan participants identify their investment profile: There’s no such thing as one-size-fits-all in any facet of life. The same holds true for retirement investments. When putting together plan options, create each one with specific participant segments in mind – those who want a hands-off, advisor-driven approach; those who want a collaborative effort, and; those who want to go it alone.

Bring tips and tricks to the table: Even your go-it-alone plan participants may not realize all the money they’re leaving on the table. Advisors can go beyond the “maximize your company match” advice by educating plan participants on such things as saver credits, Roth 401(k)s, 403 (b) and 457 plans, if applicable, and retirement income fund strategies.

Push for automatic escalation: Most plan participants don’t realize their 401(k) may come with an auto-escalation option. Educate participants in how to best increase their annual investment rate in a way that is barely noticeable, such as tying the increased investment to events such as the annual raise. By framing the incremental increases alongside raises in income, advisors can alleviate any fear the participants may have about affording the savings increase.

Help participants take advantage of new tax regulations: When the Treasury Department in 2014 created the tax framework by which investors could convert retirement funds into longevity income annuities, it became possible for investors to lock into a guaranteed, lifetime income stream. For some participants, an LIA could improve their retirement cash flow picture.

Advise on non-work-related investments: To help employees be better prepared for retirement, advisors should review plan participants’ entire investment portfolio, not just those that are part of an employer-sponsored plan. Everything from time shares to partnerships to real estate purchases impact retirement savings.  Knowing where participants are putting their money helps advisors get a clearer picture of each participants’ needs, and allows for more confidence that plan participants will be able to avoid financial shortcomings.

Retirement readiness goes beyond menu options, single-source providers, and traditional advice. The retirement advisor can help plan participants build a comprehensive plan that supercharges their retirement potential.