The Partners Circle
The mission of the Partners is to empower all of us to go directly to each other with our expertise. FiduciaryFirst is considered an industry leader and our knowledge and informative blogs can help you gain an understanding about key topics within the industry.
Recent changes have strengthened a savings tool that was already gaining popularity with retirement plan consultants. Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) were originally created by Congress to help consumers save money tax free to pay for healthcare. In 2018, contribution limits were raised, increasing the utility of these little-known but powerful accounts. Sounds Similar — But Very Different While HSAs and FSAs share some similarities, they can serve very different purposes. Retirement plan consultants can help participants boost their retirement savings by showing them an often overlooked benefit to one of these types of accounts. FSAs are employer sponsored and used to save for medical expenses that employees anticipate having during the year. HSAs are individual accounts that can be used for any purpose after age 65. Both allow money to be contributed pre-tax, and distributions are tax-free when used for qualified healthcare expenses....
Even when presented with timely and accurate financial information by fiduciary advisors, employees don’t always make the best decisions for themselves when it comes to saving for retirement. When advisors exclusively focus on financial education and fail to address underlying issues of behavioral economics, there’s a greater chance that poorer financial decision-making may occur. Helping employees overcome the cognitive biases that can lead to bad investment decisions increases their chance for success in becoming retirement ready. Short-Term Thinking Myopia, in the realm of financial planning, refers to the tendency to make shortsighted financial decisions at the expense of longer term gains. Studies show that when offered the choice of $100 now or $120 in a month, more people choose the immediate reward. However, if the offer changes to $100 in 12 months or $120 in 13 months, they more often elect the higher payout. One potential explanation for this inconsistency...
Retirement Plan Sponsors that work with a professional retirement plan advisor show higher levels of participant retirement readiness, according to a 2014 study from the Retirement Advisor Council.1 The study included 407 employers that sponsor a 401(k) or 403(b) plan, and concluded that: Improve Retirement Participant Preparation Three-quarters of the sponsors surveyed who work with a professional advisor estimate that half or more of their plan participants are on track to a successful retirement. Professional advisors regularly review the readiness of plan participants and provide that information to plan sponsors. Sponsors are then able to act in an effort to improve retirement outcomes for their employees. These actions include increasing communication, educating participants better, adjusting the participant contribution formula, and adopting automatic contribution increases. More than 40 percent of the surveyed companies have their advisors meet individually with participants to provide investment information. Increase Contribution Levels Eighty-three percent of the...