How to encourage increased investment in financial wellbeing

Is financial wellness an important part of your company culture? By promoting financial wellness among your employees', employers can reap the benefits as well. Check out this great article from Employee Benefits Advisor about the some of the effects that promoting financial wellness can have. By Cort Olsen

Financial wellness has come to the forefront of employers’ wellbeing priorities. Looking back on previous years of participation in retirement savings programs such as 401(k)s, employers are not satisfied with participation, an Aon study shows.

As few as 15% of employers say they are satisfied with their workers’ current savings rate, according to a new report from Aon Hewitt. In response, employers are focused on increasing savings rates and will look to their advisers to help expand financial wellbeing programs.

Aon surveyed more than 250 U.S. employers representing nearly 9 million workers to determine their priorities and likely changes when it comes to retirement benefits. According to the report, employers plan to emphasize retirement readiness, focusing on financial wellbeing and refining automation as they aim to raise 401(k) savings rates for 2017.

Emphasizing retirement readiness
Nearly all employers, 90%, are concerned with their employees’ level of understanding about how much they need to save to achieve an adequate retirement savings. Those employers who said they were not satisfied with investment levels in past years, 87%, say they plan to take action this year to help workers reach their retirement goals.

“Employers are making retirement readiness one of the important parts of their financial wellbeing strategy by offering tools and modelers to help workers understand, realistically, how much they’re likely to need in order to retire,” says Rob Austin, director of retirement research at Aon Hewitt. “Some of these tools take it a step further and provide education on what specific actions workers can take to help close the savings gap and can help workers understand that even small changes, such as increasing 401(k) contributions by just two percentage points, can impact their long-term savings outlook.”

Focusing on financial wellbeing
While financial wellness has been a growing trend among employers recently, 60% of employers say its importance has increased over the past two years. This year, 92% of employers are likely to focus on the financial wellbeing of workers in a way that extends beyond retirement such as help with managing student loan debt, day-to-day budgeting and even physical and emotional wellbeing.

Currently, 58% of employers have a tool available that covers at least one aspect of financial wellness, but by the end of 2017, that percentage is expected to reach 84%, according to the Aon Hewitt report.

“Financial wellbeing programs have moved from being something that few leading-edge companies were offering to a more mainstream strategy,” Austin says. “Employers realize that offering programs that address the overall wellbeing of their workers can solve for myriad challenges that impact people’s work lives and productivity, including their physical and emotional health, financial stressors and long-term retirement savings.”

The lessons learned from automatic enrollment are being utilized to increase savings rates. In a separate Aon Hewitt report, more than half of all employees under plans with automatic enrollment default had at or above the company match threshold. Employers are also adding contribution escalation features and enrolling workers who may not have been previously enrolled in the 401(k) plan.

“Employers realize that automatic 401(k) features can be very effective when it comes to increasing participation in the plan,” Austin says. “Now they are taking an automation 2.0 approach to make it easier for workers to save more and invest better.”

See the original article Here.

Source:

Olsen C. (2017 January 16). How to encourage increased investment in financial wellbeing [Web blog post]. Retrieved from address http://www.employeebenefitadviser.com/news/how-to-encourage-increased-investment-in-financial-wellbeing?feed=00000152-1377-d1cc-a5fa-7fff0c920000


HSAs could play bigger role in retirement planning

Did you know that ACA repeal could have and effect on health savings plans (HRA)? Read this interesting article from Benefits Pro about how the repeal of the ACA might affect your HRAs by Marlene Y. Satter

With the repeal of the Affordable Care Act looming, one surprising factor in paying for health care could see its star rise higher on the horizon—the retirement planning horizon, that is. That’s the Health Savings Account—and it’s likely to become more prominent depending on what replaces the ACA.

HSAs occupy a larger role in some of the proposed replacements to the ACA put forth by Republican legislators, and with that greater exposure comes a greater likelihood that more people will rely on them more heavily to get them through other changes.

For one thing, they’ll need to boost their savings in HSAs just to pay the higher deductibles and uncovered expenses that are likely to accompany the ACA repeal.

But for another—and here’s where it gets interesting—they’ll probably become a larger part of retirement planning, since they provide a number of benefits already that could help boost retirement savings.

Contributions are already deductible from gross income, but under at least one of the proposals to replace the ACA, contributions could come with refundable tax credits—a nice perk.

Another proposal would allow HSA funds to pay for premiums on proposed new state health exchanges without a tax penalty for doing so—also beneficial. And a third would expand eligibility to have HSAs, which would be helpful.

But whether these and other possible enhancements to HSAs come to pass, there are already plenty of reasons to consider bolstering HSA savings for retirement. As workers try to navigate their way through the uncertainty that lies ahead, they’ll probably rely even more on the features these plans already offer—such as the ability to leave funds in the account (if not needed for higher medical expenses) to roll over from year to year and to grow for the future, and the fact that interest on HSA money is tax free.

But possibly the biggest benefit to an HSA for retirement is the fact that funds invested in one grow tax free as well. If you can leave the money there long enough, you can grow a sizeable nest egg against potential future health expenses or even the purchase of a long-term care policy. And, at age 65, you’re no longer penalized if you withdraw funds for nonapproved medical expenses.

And if you don’t use the money for medical expenses in retirement, but are past 65, you can use it for living expenses to supplement your 401(k). In that case, you’ll have to pay taxes on it, but there’s no penalty—it just works much like a tax-deferred situation from a regular retirement account.

See the original article Here.

Source:

Satter M. (2017 January 16). HSAs could play bigger role in retirement planning [Web blog post]. Retrieved from address http://www.benefitspro.com/2017/01/16/hsas-could-play-bigger-role-in-retirement-planning?ref=hp-news


Employees putting billions more than usual in their 401(k)s

Interesting article from BenefitsPro about employee's increased input into their 401(k)s by Ben Steverman

(Bloomberg) -- Saving for retirement requires making sacrifices now so your future self can afford to stop working later. Someday. Maybe.

It’s not news that Americans aren’t saving enough. The typical baby boomer, whose generation is just starting to retire, has a median of $147,000 in all of his retirement accounts, according to the Transamerica Center for Retirement Studies.

And if you think that’s depressing, try this on: 1 in 3 private sector workers don’t even have a retirement plan through their job.

But the new year brings with it some good news: If people do have a 401(k) plan through their employer, there’s data showing them choosing to set aside more for their later years.

On average, workers in 2015 put 6.8 percent of their salaries into 401(k) and profit-sharing plans, according to a recent survey of more than 600 plans. That’s up from 6.2 percent in 2010, the Plan Sponsor Council of America found.

An increase in retirement savings of 0.6 percentage points might not sound like much, but it represents a 10 percent rise in the amount flowing into those plans over just five years, or billions of dollars. About $7 trillion is already invested in 401(k) and other defined contribution plans, according to the Investment Company Institute.

If Americans keep inching up their contribution rate, they could end up saving trillions of dollars more. Workers in these plans are even starting to meet the savings recommendations of retirement experts, who suggest setting aside 10 percent to 15 percent of your salary, including any employer contribution, over a career.

While workers are saving more, companies have held their financial contributions steady—at least over the past few years. Employers pitched in 4.7 percent of payroll in 2015, the same as in 2013 and 2014. Even so, it’s still more than a point above their contribution rates in the aftermath of the Great Recession.

One reason workers participating in these plans are probably saving more: They’re being signed up automatically—no extra paperwork required. Almost 58 percent of plans surveyed make their sign-up process automatic, requiring employees to take action only if they don’t want to save.

Automatic enrollment can make a big difference. In such plans, 89 percent of workers are making contributions, the survey finds, while 75 percent make 401(k) contributions under plans without auto-enrollment. Auto-enrolled employees save more, 7.2 percent of their salaries vs. 6.3 percent for those who weren’t auto-enrolled.

Companies are also automatically hiking worker contribution rates over time, a feature called “auto-escalation” that’s still far less common than auto-enrollment. Less than a quarter of plans auto-escalate all participants, while 16 percent boost contributions only for workers who are deemed to be not saving enough.

A key appeal of automatic 401(k) plans is that they don’t require participating workers to be investing experts. Unless employees choose otherwise, their money is automatically put in a recommended investment.

And, at more and more 401(k) and profit-sharing plans, this takes the form of a target-date fund, a diversified mix of investments chosen based on a participant’s age or years until retirement. Two-thirds of plans offer target-date funds, the survey found, double the number in 2006.

The share of workers’ assets in target-date funds is up fivefold as a result.

A final piece of good news for workers is that they’re keeping more of every dollar they earn in a 401(k) account. Fees on 401(k) plans are falling, according to a recent analysis released by BrightScope and the Investment Company Institute.

The total cost of running a 401(k) plan is down 17 percent since 2009, to 0.39 percent of plan assets in 2014. The cost of the mutual funds inside 401(k)s has dropped even faster, by 28 percent to an annual expense ratio of 0.53 percent in 2015.

See the original article Here.

Source:

Steverman B. (2017 January 5). Employees putting billions more than usual in their 401(k)s [Web blog post]. Retrieved from address http://www.benefitspro.com/2017/01/05/employees-putting-billions-more-than-usual-in-thei?ref=hp-news&page_all=1


Financial wellness: Here’s what employees want, need in 2017

Great article from our partner, United Benefit Advisors (UBA) by

Recent research into individuals’ financial resolutions for 2017 can tell you whether your financial wellness initiatives are giving employees what they want. It can also tell you whether to expect employees to increase their retirement contributions next year. 

Personal finance company LendEDU recently asked 1,001 Americans about their financial goals for 2017, as well as what their biggest concerns are. The results were published in LendEDU’s “Financial Resolution Survey & Report 2017,” which can help employers determine if their financial programs are on point.

Here are some of the more interesting Q&A’s from the research:

What’s your most important financial resolution in 2017?

  • Save more money — 52.85% of respondents selected this
  • Pay off debt — 35.56%
  • Spend less money — 11.59%

Takeaway for employers: Improving savings should be front and center in any financial wellness strategy.

What’s your top financial resolution?

  • Make and stick to a budget — 21.38%
  • Save for a large purchase like a down payment, household upgrade, or car, etc. — 19.28%
  • Pay down credit card debt — 18.88%
  • Place money aside for an emergency — 16.58%
  • Save for retirement — 13.69%
  • Pay down student loan debt — 7.29%
  • Save for college — 2.90%

Takeaway for employers: Employees need the most help creating a budget they can stick to.

What’s your top financial concern?

  • Unexpected expenses — 53.25%
  • Healthcare costs — 23.98%
  • Higher interest rates — 9.69%
  • The labor market — 7.79%
  • Stock market fluctuations — 5.29%

Takeaway for employers: Helping employees manage healthcare costs can be a key add-on to any financial education program.

Do you think you’re better off financially in 2017 than in 2016?

  • Yes — 78.32%
  • No — 21.68%

Takeaway for employers: Employees’ financial state of mind is on the upswing, which is good. But it could make increasing participation in wellness initiatives more challenging.

Do you make financial resolutions with your spouse or significant other?

  • Yes — 84.83%
  • No — 15.17%

Takeaway for employers: When it comes to finances, very few people go it alone, so invite spouses to be a part of your wellness offerings.

What would make you stick to a financial resolution?

  • Having a reward for reaching the goal — 37.56%
  • Segmenting a longer term goal into smaller bit sized pieces — 20.08%
  • Technology that helps you save money or monitor goals in real-time — 19.38%
  • The encouragement of family and friends — 13.99%
  • Having a consequence for not reaching the goal — 8.99%

Takeaway for employers: Incremental rewards and incentives, can help drive participation and success in 2017 financial wellness initiatives.

Do you think you’ll increase your retirement savings contributions this year?

  • Yes — 63.24%
  • No — 36.76%

Takeaway for employers: This could be a good year to really push employees to bump up retirement plan contributions.

See the original article Here.

Source:

Author (Date). Title [Web blog post]. Retrieved from address http://www.hrmorning.com/financial-wellness-heres-what-employees-want-need-in-2017/


9 reasons why retirement may go extinct

Worried about your future retirement? Check out this great read by Marlene Satter

Retirement as we know it may be set to disappear, as younger people look for ways to finance surviving into old age.

But extinction? Surely not.

However, according to the Merrill Edge Report 2016, that might just be in the offing, as workers change how they plan and save for retirement and how they intend to pay for it.

Millennials in particular represent a shift in attitude that includes very unretirement-like plans, although GenXers too are struggling with ways to pay their way through their golden years.

That’s tough, considering that most Americans neither know nor correctly estimate how much money they might need to keep the wolf from the door during retirement—or even to retire at all.

Here’s a look at 9 reasons why retirement as we know it today might be a terminal case—unless things change drastically, and soon.

9. Ignorance.

Most Americans have no idea how much they might need to retire, which leaves them behind the eight ball when trying to figure out when or whether they can afford to do so.

Of course, it’s hardly surprising, considering how many are members of the “sandwich generation,” who find themselves caring for elderly parents while at the same time raising kids, or even trying to put those kids through college.

With soaring medical costs on one end and soaring student debt on the other, not to mention parents supporting adult children who have come home to roost, it’s hard to figure out how much they’ll need to meet all their obligations, much less try to save some of an already-stretched income to cover retirement savings as well.

8. Poor calculations.

We already know most workers don’t know how much they’ll need in retirement—but it’s not just a matter of ignorance. They don’t know how to figure it out, either.

More than half—56 percent—figure they’ll be able to get by during retirement on a million dollars or less, while 9 percent overall think up to $100,000 will see them through.

And 19 percent just flat-out say they don’t know how much they’ll need.

Considering that health care costs alone can cost them a quarter of a mil during retirement, the optimists who think they can get by on $100,000 or less and even those who figure $100,000–$500,000 will do the job are way too optimistic—particularly since saving for medical costs isn’t one of their top priorities.

7. Despair.

It’s pretty hard to get motivated about something if you think it’s not achievable—and that discourages a lot of people from saving for retirement.

Those who have a “magic number” that they think will see them through retirement aren’t all that optimistic about being able to achieve that level of savings, with 40 percent of nonretired workers saying that reaching their magic number by retirement will either be “difficult” or “virtually unattainable.”

 

6. Luck.

When you don’t believe you can do it on your own, what else is left? Sheer dumb luck, to quote Professor Minerva McGonagall at Hogwarts after Harry and Ron defeated the troll.

Only instead of magic wands, 17 percent of would-be retirees are sadly (and amazingly) counting on winning the lottery to get them to their goal.

 

5. The gig economy.

Retirement? What retirement? Millennials in particular think they’ll need side jobs in the gig economy to keep them from the cat food brigade.

In addition, exactly half of younger millennials aged 18–24 believe they need to take on a side job to reach their retirement goals, compared with only 25 percent of all respondents. They don’t believe that just one job will cut it any more.

 

4. Attitude adjustment.

While 83 percent of current retirees are not currently working or never have during their golden years, the majority (83 percent) of millennials plan to work in retirement—whether for income, to keep busy or to pursue a passion.

The rise of the “gig economy" has created an environment where temporary positions and short-term projects are more prevalent and employee benefits such as retirement plans are less certain. This may be why more millennials (15 percent) are likely to rank an employer’s retirement plan as the most important factor when taking a new job compared with GenXers (5 percent) and baby boomers (5 percent).

Older generations had unions to negotiate benefits for them. Millennials might realize they have to do it all themselves, but they aren’t negotiating for salaries high enough to allow them to save.

And union benefits or not, 64 percent of boomers, 79 percent of Gen Xers and even 17 percent of currently retired workers plan to work in retirement.

 

3. A failure to communicate.

Lack of communications is probably not surprising, since most people won’t talk about savings anyway.

Fifty-four percent of respondents say that the only person they feel comfortable discussing their current retirement savings with is their spouse or partner. Only 36 percent would discuss the subject with family, and only 22 percent would talk with friends about it.

And as for coworkers? Just 6 percent would talk about retirement savings with colleagues—although more communication on the topic no doubt could provide quite an education on both sides of the discussion.

 

2. Misplaced confidence.

They won’t talk about it, but they think they do better than others at saving for retirement. How might that be, when they don’t know what others are doing about retirement?

Forty-three percent of workers say they are better at saving than their friends, while 28 percent believe they’re doing better at it than coworkers; 27 percent think they’re doing better than their spouse or partner, 27 percent say they’re doing better than their parents and 24 percent say they’re beating out their siblings.

All without talking about it.

 

1. DIY.

They’re struggling to figure out how much they need, many won’t talk about retirement savings even with those closest to them and they’re anticipating working into retirement—but millennials in particular are taking a more hands-on approach to their investments.

Doing it oneself could actually be a good thing, since it could mean the 70 percent of millennials, 72 percent of GenXers and 57 percent of boomers who are taking the reins into their own hands better understand what they’re investing in and how they need to structure their portfolios.

However, doing it oneself without sufficient understanding—and millennials in particular are also most likely to describe their investment personality as “DIY,” with 32 percent making their own rules when it comes to investments, compared to 19 percent of all respondents—can be a problem.

After all, as the saying goes, “A little knowledge is a dangerous thing.”

See the original article Here.

Source:

Satter M. (2016 December 7). 9 reasons why retirement may go extinct[Web blog post]. Retrieved from address http://www.benefitspro.com/2016/12/07/9-reasons-why-retirement-may-go-extinct?ref=mostpopular&page_all=1


3 ways to help employees with retirement planning

by Marlene Satter

Lack of confidence, lack of knowledge and lack of money all plague workers trying to save for retirement, leaving them working longer than they planned and saving considerably less than they need.

But a series of surveys from TIAA has identified three ways that plan sponsors can help to improve retirement outcomes for their employees.

Employees want income for life, for instance, with 49 percent saying that their retirement plan’s top goal should be providing guaranteed monthly income in retirement.

And although it’s something they badly want, 41 percent are unsure if their current plan has that as an option.

1. Employees need help figuring how much retirement income they'll need and how to translate savings into income - Plan sponsors can help with this, said the data, by helping employees be realistic about how much income they’ll need in retirement—something few have figured out.

While 63 percent of Americans who are not retired estimate that they’ll need less than 75 percent of their current income to live comfortably, most experts recommend replacing 70–100 percent of current income in retirement.

Compounding the situation is the fact that 53 percent of employees haven’t even figured out how to translate their savings into income—while 41 percent of people who haven’t yet retired are saving less (many considerably less) than the 10–15 percent of income experts recommend.

Lifetime income options such as annuities are one way to guarantee income replacement during retirement, but most people are unaware of them or of how they work. Just 10 percent of Americans have annuities, so for the other 90 percent, they’re not an option.

2. Employees are interested in receiving financial advice - Sponsors can also offer financial advice as part of a benefits package.

While 61 percent of those who have received advice feel confident about their financial situation, just 37 percent of people who haven’t feel that way.

But the cost—or perceived cost—of seeking advice is putting them off, as is distrust of advisors in general.

Although 71 percent of Americans say they’re interested in receiving advice, more than half haven’t.

For instance, 35 percent of Americans who have not worked with a professional financial advisor say they don’t think they have enough money to justify a meeting; 51 percent say they don’t have enough money to invest (49 percent believe they need more than $50,000 in savings to get an advisor to talk with them), while 45 percent have concerns about cost and affordability.

And 34 percent don’t know whom they can trust.

3. Employees can use tools and resources early and in all stages of retirement planning - Last but not least, the study found that getting involved early in the planning process can make a difference.

Sponsors who introduce resources for all stages of the financial planning process, with customizable planning tools and tailored support based on employees’ life stages, can help employees consider what they need to do to prepare for retirement, even if that day is years away.

Such tools can make it easier for employees to evaluate their personal risk tolerance, asset allocation and the current status of Social Security and Medicare to help them better envision their future retirement and the steps they can take to make sure that their retirement is successful

See the original article Here.

Source:

Satter M.(2016 December 8). 3 ways to help employees with retirement planning[Web blog post]. Retrieved from address http://www.benefitspro.com/2016/12/08/3-ways-to-help-employees-with-retirement-planning?ref=hp-news


Adopting a coaching mindset to help employees plan for retirement

Are your employees prepared for retirement? See how Cath McCabe gives tips and tricks on coaching your employee for retirement.

America may be becoming the land of the free and the home of the grey as more adults are living longer lives.

According to the Administration on Aging, the number of centenarians more than doubled between 1980 and 2013. But lifespans aren’t the only thing increasing – so are the expenses that many older Americans face.

Retiree health care costs have surged exponentially – the Employee Benefits Research Institute (EBRI) estimates that the average healthy 65-year-old man will need $124,000 to handle future medical expenses. For a healthy woman of the same age, the expected amount is $140,000.

Many of these extra years – or decades – will be spent in retirement, so it’s crucial that Americans plan to have the income they need not only to retire, but to last throughout a potentially long retirement.

Since many adults use employer-sponsored retirement plans as a source of retirement funding, plan sponsors are in a key position to act as retirement “coaches” by encouraging employees to plan ahead and help them plan for their financial security in retirement.

Engage employees early and often

We have found that employers are a trusted source of financial information for employees. Plan sponsors can leverage this trust to engage employees with a variety of programs and tools that help them understand their future retirement income needs.

A plan sponsor’s role as coach begins when employees begin their careers by providing financial education.  Education can help new employees recognize the importance of contributing to a retirement plan and the benefits of saving early, as well as help to optimize employee participation in retirement programs. Education designed for mid-career employees, and those nearing retirement, can cover more complex topics as they encounter life events that require a change to their road map for retirement.

And if employees can get started earlier in their careers, there is an increased likelihood that employees will have a positive retirement experience. A recent survey among current TIAA retirees found that those who began retirement planning before age 30 are more likely to retire before the age of 60, and 75 percent say they are very satisfied with their retirement.

Coach employees through education and advice to create a retirement road map

Many Americans need help in setting and achieving their retirement goals – a recent survey found that 29 percent of Americans are saving nothing at all for retirement. It’s important to develop a retirement coaching strategy that can help put participants in the right frame of mind and offers the resources they need to establish clear retirement goals and a road map for achieving those goals.

Many people think about their retirement savings in terms of accumulation – how much of a “nest egg” they’re able to build to fund their retirement. But employers should help their employees think about their retirement savings in terms of the amount of income they will have each month to cover their living expenses. Having a source of guaranteed lifetime income can help employees mitigate the risk of outliving their retirement savings.

As a rule of thumb, most employees will need between 70 percent and 100 percent of their pre-retirement income.  If employees find they are not on track to meet this ratio, plan sponsors can help identify the necessary actions to increase the chance of success. For example, employees may need to increase their savings rate. Plan sponsors can help by encouraging employees to save enough of their own dollars to get the full employer match. If employees already are saving enough to get the full match, they then should aim to increase their contributions each year until they are saving the maximum amount allowed.  Many employees older than 50 also can take advantage of catch-up provisions to save additional funds.

Perhaps the most important function of education is to drive employees to receive personalized advice from a licensed financial consultant supporting the employer’s retirement plan. This is where the road map is created, with the advisor providing turn-by-turn guidance. For most employees, an annual meeting can help keep them on track.

Why is it important to “coach” employees to create the road map? Simply put, it can improve both plan outcomes and the employees’ retirement outcomes.  Advice is proven to positively correlate with positive action – enrolling, saving or increasing saving or optimizing allocations. (See this Retirement Readiness research for more information). Individuals who have discussed retirement with an advisor are much more likely to “run the numbers” and calculate how much income they’ll need in retirement – 79 percent versus only 32 percent who have not met with an advisor.

Helping employees along the road to retirement is a win-win for employees and plan sponsors, even beyond the fiduciary requirements. A 2015 EBRI report found that 54 percent of employees who are extremely satisfied with their benefits, such as their retirement plan and health insurance, also are extremely satisfied with their current job. Similarly, a 2013-2014 Towers Watson study revealed that nearly half (45 percent) of American workers agree that their retirement plan is an important reason why they choose to stay with their current employer. Establishing strong connections between employees and their retirement plans may aid employers’ retention efforts.

Supporting employees on their retirement readiness journey

Once employees have a better sense of the actions they need to take, plan sponsors can provide additional support by highlighting the investment choices that may help employees achieve their desired level of income. Many employees may understand how to save, but they are far less familiar with how and when to withdraw and use their savings after they have stopped working. Offering access to lifetime income options, such as low-cost annuities, through the plan’s investment menu can help employees create a monthly retirement “paycheck” that they can’t outlive.

The peace of mind that these solutions offer can last a lifetime, too. A survey among TIAA retirees found that those who have incorporated lifetime income solutions into their retirement have been satisfied with that decision. Among the retirees with a fixed or variable annuity, 92 percent are satisfied with their decision to annuitize.

Employers also should set a benchmark for regularly evaluating employees’ progress toward their retirement goals. This will allow employees to monitor their retirement outlook and identify opportunities to adjust their savings strategy so they don’t veer off their retirement road map.

Remember the emotional aspect of retirement

In addition to the financial aspects of retirement planning, it’s important to factor in emotional considerations. Offering a mentoring program, one-on-one advice and guidance sessions, or workshops and seminars to guide people on how to navigate this major milestone could be helpful for new retirees.

For some employees, going from working full time to not working at all may be a too abrupt change. Employers may want to consider offering a phased approach to retirement that gives employees the opportunity to work part time or consult to help ease the transition. An alumni program that offers occasional reunions or other programming can help retirees still feel connected to their organization for many years after they stop working.

Employers are uniquely positioned to guide employees through the retirement planning process, from early in their careers to their last day in the office – and beyond. It’s not enough to simply get employees to retirement: Plan sponsors need to help them get through retirement as well. Establishing a coaching mindset can be an effective way to actively engage employees in retirement planning and help them see that the end of their working careers can be the beginning of a wonderful new stage of life.

See the Original Post from BenefitsPro.com Here.

Source:

McCabe, C. (2016, August 04). Adopting a coaching mindset to help employees plan for retirement [Web log post]. Retrieved from http://www.benefitspro.com/2016/08/04/adopting-a-coaching-mindset-to-help-employees-plan?slreturn=1472491323&page_all=1


Why planning for retirement matters

Planning for retirement is a bit of a numbers game. It's not just about deciding when you plan to retire, but also estimating how many years you plan to live in retirement. You also have to figure in the cost of healthcare during retirement which could include long-term care.

According to numbers from the National Retirement Planning Coalition, there's been a significant increase in the life of a 65-year-old over the past generation.

In 1980, the average life expectancy for a 65-year-old man was 79.1 years and for a female it was 83.3 years. In 2010, that number increased by over 3 years.

While 3 years may seem small, it can have a financial impact on those living in retirement.

An example from the from the National Retirement Planning Coalition shows a 21 percent increase.

$50,000 of annual expenses in retirement

  • 14 years in retirement = $700,000
  • 17 years in retirement = $850,000

The example above does not include the cost of healthcare in retirement which can drive up the cost. The Insured Retirement Institute (IRI) and Health View Services estimate the cumulative health care expenses for a 65-year-old man in 201 was $370,000 and for a woman $417,000. That does not include the cost of long-term care.

The majority of workers today depend on individual account plans, defined contribution plans and individual retirement accounts to save for retirement.


IRS Makes it Riskier to Maintain Individually-Designed Retirement Plans

Originally posted by ubabenefits.com

The Internal Revenue Service just made it riskier to maintain a tax-qualified individually-designed retirement plan by eliminating the five-year determination letter remedial amendment cycle for these plans, effective January 1, 2017.

Although determination letters are not required for retirement plans to maintain tax-qualified status under the Internal Revenue Code, virtually all employers sponsoring individually-designed retirement plans have long relied on the Internal Revenue Service’s favorable determinations that their plans meet the Code’s and the IRS’ vexingly complex – and ever-changing – technical document requirements. A plan risks losing tax-qualified status (and all the favorable tax treatment that goes along with that status) if the plan document is not timely amended to reflect frequent, sometimes obscure, Code and regulatory changes. In light of that, the IRS has long offered a program for reviewing and approving those plan documents – often conditioning its favorable determination letter on the employer’s adoption of one or more corrective technical amendments. The current program, established in 2005, has provided for a five-year remedial amendment cycle which effectively extended the period of time during which a plan could be amended under certain circumstances to retroactively comply with the ever-changing qualification requirements. Under this determination letter program, employers have filed for determination letters for their individually-designed plans every five years and had an opportunity to fix plan document issues raised by the IRS on review.

The IRS announced elimination of the five-year determination letter remedial amendment cycle in Announcement 2015-19 and said that determination letters for individually-designed plans will be limited to new plans and terminating plans. A transition rule applies for certain plans currently in the five-year cycle (i.e., employers with “Cycle E” or “Cycle A” plans may still file for determination letters) but, effective July 21, 2015, the IRS will not accept off-cycle applications except for new plans and terminating plans.

The IRS said that plan sponsors will be permitted to submit determination letter applications “in certain other limited circumstances that will be determined by Treasury and the IRS” but did not give a hint as to what those circumstances might be. The IRS intends to periodically request comments from the public on what those circumstances ought to be and to then identify those circumstances in future guidance.

In addition, the IRS said that it is “considering ways to make it easier for plan sponsors to comply with the qualified plan document requirements” which might include providing model amendments, not requiring amendments for irrelevant technical changes, or permitting more liberal incorporation by reference.

Comments on the issues raised in the Announcement – e.g., what changes should be made to the standard remedial amendment period rule, what considerations ought to be taken into account regarding interim amendments, and what assistance should be given to plan sponsors wishing to convert to pre-approved plans – may be submitted to the IRS until October 1, 2015.


Don't Eat the Marshmallow

Originally posted by Troy Hammond on April 14, 2015 on www.linkedin.com.

Having more self-control than a preschooler can lead to more rewards.

Fifty years ago, psychologists at Stanford University conducted an experiment on preschoolers. During this test, researchers placed youngsters in individual rooms and asked each child to sit down in front of a tray containing one marshmallow. The child was given a choice: He or she could eat this marshmallow immediately or wait a little while for the researchers to place a second marshmallow on the tray—an opportunity to enjoy two treats instead of just one.

What did the kids do, what would you do, and what does the ability to delay gratification mean for future retirement success?

While encouraging kids to eat more candy wasn’t the goal of this multi-year study, it eventually led to a powerful conclusion: Children who “passed” the marshmallow test had greater competence and success later on as adults.1 Kids who successfully waited for the second marshmallow showed self-restraint and understood that not all needs require immediate gratification. This example is directly applicable to behavioral finance: Controlling spending now may lead to significant benefits in the future.

Patience is not just a virtue—it may create its own success

There are a few steps you can take today that potentially could lead to greater retirement success tomorrow. They include:

  • Enrolling in your 401(k). By setting aside money from each paycheck before you ever see it, you avoid unnecessary spending.
  • Making a habit of saving and increasing your plan contributions. Some experts say you should save 15% of your pretax income each year for your retirement, including your 401(k) and IRA. If your plan offers any employer matching contributions, take advantage of these as well.
  • Knowing when you may need professional advice. Those who lack confidence in their ability to manage their investments may be more prone to “cash out” at the worst time—at market lows—and wreck their retirement plan. Unless you are comfortable making your own investment decisions and making changes to your account as your retirement date nears, consider tapping professional advice that may be available to you within your employer’s retirement plan.

Self-control in retirement planning is key: By avoiding impulse spending and investing consistently over time to pursue rewards, you may move that much closer to securing your financial future.

1 Walter Mischel, The Marshmallow Test: Mastering Self-Control (New York: Little, Brown & Co., 2014).

Disclosure: This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. LPL Financial and its advisors are providing educational services only and are not able to provide participants with investment advice specific to their particular needs. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.