Women face a number of hurdles in saving for retirement, including lower average pay than men and more time away from careers. That’s creating a serious retirement savings gap for women. According to a study from the Insured Retirement Institute released in November, 2015, 82 percent of women are “very concerned” about saving for retirement, compared to 75 percent of men. That’s not the only difference between men and women the study found, though. It’s important for plan sponsors and their retirement plan sponsors to understand how women feel about retirement savings. The study, which included 1,002 respondents, found:
Women Aren’t “Do-it-Yourselfers.” While 40 percent of men preferred to handle their own retirement planning, only 20 percent of women did. In fact, a total of 43 percent of women preferred to work with an investment advisor online or over the phone or have an investment advisory service select investments for them....
The first step in retirement planning is saving; people who aren’t saving need to start and people who are need to save more. But that’s just the first step. Plan sponsors should understand that once participants are enrolled, they will need a lot more guidance in monitoring and adjusting their retirement plans. Your investment advisory service typically provides retirement plan consulting for your employees, and you should encourage your participants to take advantage of these services. Here are some things your retirement advisors can help your participants understand:
Long-Term Focus: Markets move up and down, and it’s easy for participants to overreact to short-term shifts. Your advisor can help give your participants the perspective they need for retirement.
Inflation:Risk-averse participants often don’t understand how much inflation can eat away at their savings. Along with emphasizing a long-term focus, your consultant can show your participants how risky “playing it safe” may actually...
Now that we’re into 2016, many plan sponsors are reviewing their retirement plans. It’s a complex and time-consuming process, and plan sponsors that don’t have investment advisory services may want to reconsider. The following items are services that investment advisors can provide:
Plan Design: Your retirement plan consultant can evaluate your plan and make suggestions about changes you may need to remain effective and help address compliance requirements. Your investment advisor can also review your investment policy statement (IPS) and make sure it is current.
Plan Documentation: Your advisor can help you document your compliance with ERISA regulations, like 404(c) rules regarding qualified investment alternatives (QDIA), as well as help with other plan documentation and records retention.
Investment Performance: Your investment advisor can review the performance of the investment alternatives available through your plan and provide quarterly reports to help you evaluate your investment options. If it’s necessary to replace...
Rising healthcare costs are on everyone’s mind, even for affluent people. In fact, 69 percent of affluent pre-retirees city rising healthcare costs as one of their top fears in retirement, according to a survey from the Nationwide Retirement Institute. In fact, 63 percent of these affluent pre-retirees describe themselves as “terrified” of what healthcare costs may do to their retirement plans. But more than half (53 percent) say they are not comfortable talking to their spouse about these fears. One in ten stated they just didn’t want to think about it.
However, ignoring a problem doesn’t make it go away. Here are some steps you can take to plan for your healthcare in retirement:
Start budgeting. Figure out how much Medicare will cover and how much you’ll need to come up with. Medicare won’t cover all your medical expenses and it isn’t free. Understanding what Medicare covers and what it doesn’t...
People are very different, so it comes as no surprise that everyone prepares for retirement differently. A survey published in November 2015 by investment management and research team AB examined some of the differences among people who are saving for retirement. The survey highlighted some of the strengths and weaknesses of different types of plan participants, dividing them into three groups.
Capable Investors: This group of plan participants is generally older, with a median age of 50, and has the highest income. Capable investors show a high degree of financial literacy and are mostly comfortable in making decisions on how to allocate their retirement portfolio. Most (85 percent) are somewhat to very confident of a comfortable retirement. Their biggest weakness tends to be overconfidence; many may take on more risk when investing than other types of investors.
Eager Investors: Eager investors are younger than capable investors (median age 38) and are...
A secure and enjoyable retirement doesn’t just happen. You need to plan for it. And the sooner you start planning, the more time you’ll have to make changes and adjustments to meet your retirement goals. Here are seven things you should consider for your retirement plan.
What will you do? Retirement could last 20 or more years, and you’ll probably need to find something to do with that time. Most happy retirees set goals for themselves. Also, you should have some idea of what you want to do to make sure you can pay for it.
Will you work? More and more people plan on working after retirement. If you do, make sure you realistically assess the opportunities for the kind of work you want to do.
Where will you live? This is going to be affected by other decisions, like what you want to do after retirement. If you want...
Younger workers have a lot of concerns, and, unfortunately, saving for retirement doesn’t usually top the list, which includes launching a career, repaying educational loans, buying homes, and other priorities. Unfortunately, though, not considering retirement at a younger age squanders one asset that none of us can ever recover – time. Compounding allows small sums to turn into significant assets, and the longer younger workers wait to start saving for retirement, the more they’ll need to put away. So how can plan sponsors reach younger workers?
Automatic Enrollment: Automatically enrolling younger workers into a company retirement plan can be an effective tool to get them started. Once in the plan, many workers will simply continue to participate rather than make the effort to opt out. Typically, automatic enrollment is coupled with automatic escalation, which increases the employee’s participation percentage on a regular basis. Funds can be invested in qualified default investment...
According to the US Department of Labor (DOL), about 30 percent of eligible employees don’t participate in their employer’s retirement plan. The DOL notes that adding an automatic enrollment feature to the plan could reduce this non-participation rate to less than 15 percent.
However, there’s more to adding auto enrollment to your plan than just deciding to do it. Plan sponsors have to make a number of decisions before implementing auto enrollment, including:
Who to Enroll: Many plans that feature automatic enrollment sign up participants as of their date of hire. The advantage is that these participants get used to their initial paycheck amount and don’t see a drop later. However, if the employer has high turnover, that can generate more work for the employer for short-term employees. Each employer should review their hiring and retention data to see what makes sense for that business, such as immediate enrollment or waiting...
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