The Census Bureau predicts that by 2050, more than 400,000 Americans will be over the age of 100. That creates a real financial concern: Will your retirement funds last long enough, or will you spend that time struggling to make ends meet? As a plan sponsor, educating your participants about this issue is important – you want to help them make sure their finances are healthy enough to support them throughout retirement, however long that may be. Some ways to extend retirement income include:
Plan ahead. Put together a budget that matches your financial needs with your income. That type of cash flow analysis will help you make sure you know how much you’ll need in retirement before you actually retire. It may also be a good idea to conduct a dress rehearsal: Try to live on your budget before you retire. Review all your retirement accounts and Social Security, and...
As a plan sponsor, you want to make sure your participants have a secure retirement. More and more Americans are continuing to work for a variety of reasons, including maximizing their Social Security benefits and continuing to contribute to their 401(k)s. Another reason, though, is that many Americans don’t have confidence in their ability to retire comfortably. When thinking about retirement, your participants should give careful thought to what they want to do with both their time and their money. Some of the things to consider include:
Do you have enough? You need to review your retirement expenses and balance those against your sources of income. Create a retirement budget with monthly expenses and monthly income to determine if you have enough to live on in retirement.
Review your credit. Make sure you’re not carrying high-interest credit card debt into retirement. If you’re paying more in interest that your retirement accounts...
As a plan sponsor, it’s important that you understand your fiduciary duties. Often sponsors overlook some fiduciary responsibilities, or believe that they have “outsourced” their fiduciary functions. FiduciaryFirst can advise you on your key fiduciary responsibilities and help you understand and manage your fiduciary duties.
What is a fiduciary and why is that important?
For retirement plans, a fiduciary is generally anyone with discretionary authority or control over the plan itself or the investments offered by the plan. Fiduciaries include plan trustees, plan sponsors, external advisors who provide investment advice, and owners and managers of the company that offers the retirement plan. Usually fiduciaries are spelled out in the plan document that established the company’s retirement plan. These fiduciary definitions can be complex, and FiduciaryFirst can help you determine who is a fiduciary in your plan.
Understanding who the fiduciaries are for your retirement plan is important, since fiduciaries are personally...
The most common vehicle for retirement savings has become the 401(k) plan, which are primarily funded by employee contributions. Workers can choose whether or not they want to participate in the plan, and can reduce or eliminate their contributions whenever they want. What, then, are the best ways to encourage participation in your company’s 401(k) plan?
Start immediately. The best time to enroll an employee is when he or she is hired. You have the employee’s full attention, and he or she is more likely to be enthusiastic. Requiring an extended period of service before entering the plan discourages participation. Further, automatic enrollment, where the employee is automatically entered as soon as he or she becomes eligible unless the employee chooses not to participate, also increases participation.
Communicate regularly. Plan communication and education should be an ongoing process, with the materials presented clearly using examples, like projected benefit illustrations. This helps...
A 401(k) plan is a powerful tool for saving for retirement, and almost everyone can benefit from participating in a 401(k) plan. Some of the reasons a 401(k) plan may be a good idea for your employees include:
They save on taxes, and their money grows tax-deferred. Contributions to a 401(k) plan are not taxed as current income, which means participants pay less in taxes each year. The investment earnings on funds in the plan are also not taxed as long as they stay within the plan, which means the money participants would normally pay in taxes on earnings continue to earn money for them. They’ll eventually pay taxes on both contributions and earnings, but if they withdraw the funds after retirement, they may well be in a lower tax bracket than they are now.
Their money belongs to them. Unlike employer-provided pension plans, participants own their 401(k) contributions. As their...
Most people have heard of 401(k) retirement plans. However, there is a lesser-known type of retirement plan that is only available to tax-exempt groups such as K-12 schools, colleges and universities, hospitals, and libraries. Named 403(b) retirement plans after the section of the federal tax code that created them, these plans are similar to 401(k) plans, but have some crucial differences.
How does a 403(b) plan work?
Participants in 403(b) plans agree to allow their employers (the plan sponsors) to take a portion of their paychecks before taxes and contribute that to the plan. The employer may also match a portion (or all) of the employee’s contribution. The employee is not taxed on the money invested in the 403(b) plan or the gains on that money until the funds are withdrawn, typically after retirement, and earnings, dividends, or capital appreciation earned on plan contributions are not taxed until the employee starts...
A survey recently released by Aon Hewitt showed that 19 percent of employers are now matching all their employees’ 401(k) plan contributions up to 6 percent of salary. That’s a significant increase from 2011, when 10 percent of employers provided that level of matching, and from 2001, when only 4 percent of employers offered that level of 401(k) matching.
Employers are obligated to provide matching contributions, but clearly, more and more are doing so. What are the benefits to plan sponsors of providing matching contributions to plan participants?
Improved recruiting and greater retention. Offering a retirement plan such as 401(k) has become a critical element of employee compensation, as more potential hires become concerned about saving for retirement. Matching contributions gives your plan an additional “edge” when a prospective employee is comparing it to those offered by other companies, and also helps retain current employees who might not find similar matching...
To attract and retain talent, most companies rely on three key employee benefits: Competitive salaries, medical insurance, and a retirement plan. That means your 401(k) plan is a critical component of your employee recruitment and retention program, and can even improve your profitability, reducing the amount of time and money you spend to advertise and fill open positions. According to a study by Wilson Wyatt Worldwide, companies that provide and promote a strong benefits package to attract and retain staff can add 7.3 percent to their bottom lines.
Sponsoring a 401(k) plan in your company is important for a number of reasons:
Everyone else is doing it. WorldatWork, a nonprofit human resources association, estimates that 95 percent of its member companies offer a 401(k) plan. It’s difficult to retain your talent if you’re not offering a benefits package that’s comparable to other employers.
It shows you care. Assisting your employees in...
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