Fiduciary Is Fun!
(a.k.a. I heart taxes)
(a.k.a. I heart taxes)
The word “Retirement” congers many different thoughts and images. I can tell you that after having spent 25 years working with companies and employees that “retirement” seldom means the same thing to two different people.
And the definition of retirement just keeps getting more jagged as the Baby Boomers reach their senior years. Research from AP-NORC Center shows that the idea of retiring on your own terms and putting your feet up for your remaining days is something that fewer and fewer people do. In fact, if that was ever the reality, it certainly is not prominent today.
A couple of stats from the research to get us started: over 1/3rd of Americans who consider themselves retired did not retire by choice. Most common reason people take early retirement? Health problems or disability. One out of every 3 people stop working not by choice. Find that surprising? I do. 43% of Americans over 50 say that the thought of retirement causes them to be more “anxious” than “excited.” That’s probably not good. And 56% of Americans say they expect to work past 65 with 27% of those saying they never expect to retire.
Now this last statistic may not be all that bad. Many people find purpose and enjoyment to work and working past age 65 is a choice that they welcome, not a need they bear. It’s an option, not a requirement. And that is worth keeping in mind. Rather than being forced to work beyond what your health can bear or what you need to do to provide for living expenses, isn’t it nice to think that your golden years might afford you the chance to continue to stay involved, find purpose and enjoyment without the financial requirement to do so?
What's the lesson here? It is critically important to promote savings, budgeting, and planning as early in one’s career as possible so that when those later years approach, they are not met with anxiety, but rather with hope and excitement of what can be.
If you want to work with an advisor who shares such a vision, please give me a call!
As of 2018, student loan debt is now the second highest consumer debt category – behind only mortgage debt – and higher than both credit cards and auto loans. According to Make Lemonade, a consumer finance company, more than 44 million borrowers have student loans and the collective debt is greater than $1.5 Trillion. The average borrower owes $37,172. And, of course, the largest group of borrowers is under age 30.
If you find these stats a little disconcerting, you should. How this debt is impacting our society is being felt in many ways. For those who are shouldering this debt, it means that many of the things they would otherwise be spending money toward must instead be used to pay off their student loans. When you consider that most of the individuals who have this debt are also just starting out in life and need to begin building a life separate from their parents or college, the financial hill they need to climb can be more than intimidating; it can be debilitating.
What’s this have to do with your retirement plan? For one thing, we are seeing more and more young people unable to contribute to their company’s 401k plan as they need to use those dollars for debt payment. At first glance, this might not seem like much of a worry for employers, but when you consider that the delay in participation could last for 5-10 years, the real impact to employees who are now falling behind in retirement savings can be huge. Moreover, think about the increased stresses these borrowers are feeling as a result of just trying to dig themselves out of this financial hole.
Is there something an employer can do? There are several things actually. A financial advisor can work with employees to help them with budgeting and cash flow management. A good advisor can also work with the employer to help craft a way via the retirement plan whereby the employer can still make some “matching contributions” to the plan for those employees who are paying down debt instead of making 401k deferrals. In fact, this idea is gaining so much momentum that legislation is even being proposed in Washington to codify how to do this.
Want to learn more about how to help your employees manage the student loan burden? Give me a call! I work a lot in this space.
I just picked up a new client and the reason might be a bit surprising. The client was quite happy with their 401k Recordkeeper and made it clear from the outset that they were making no changes with them. Rather, they did not feel that their advisor was moving the needle with employees and it was time for a replacement. They decided to interview prospective advisors, including me, but were not sure what they wanted other than “better engagement with employees.”
After 25 years of working with corporate retirement plans, I did not find this prospect/client to be much different than most. They felt like something was lacking with their existing advisor but couldn’t clearly see what needed to be done to improve things. It’s not their fault. Their job is to run their business not understand everything there is to understand about their 401k plan.
When meeting with a prospect like this, I find it always helpful to inquire as to their wish list and when they invariably struggle (again, not their fault) that is the point where I am able to offer some possible suggestions. What I generally recommend as one of the first items on the list is that it be shown how the plan will be improved through objective data by hiring me. Data should drive our analysis around improvements and serve to justify initiatives, but outside of actual investment performance returns, most companies struggle with defining how the plan is objectively improved.
The first step in showing improvement is to get an analysis of where we are today. For this client, the reason they awarded me the business was my ability to actually baseline today the state of the employees’ financial security and roll that up to an overall corporate score. From here, we will target individuals and groups for financial training and measure the results of actions taken. Over time, we will benchmark the plan again and be able to measure improvements.
This doesn’t sound all the complicated, right? Nevertheless, you might be surprised how few people understand how and why benchmarking current state is so important. To learn how I can help you and your employees, please give me a call!
Are you like most Americans who dream of a comfortable retirement that will start sometime in your mid-60s? For most Americans, they can’t even imagine another scenario. However, new data suggests that the dream is becoming less a reality and more of a pipe dream.
According to a new report by United Income, the percentage of Americans who are over 65 and still working is at the highest level in 57 years! Over 20% of all Americans who are at or above retirement age, i.e. 65 or older, are still working. In 1985 it was 10%. Additionally, according to some research from the New School for Social Research, the median savings for a “middle class employee”, someone earning more than $40,000 but less than $115,000, is $60,000. $60,000! It’s no wonder that more and more employees are continuing to work beyond age 65...they have little other choice!
If you are an employer who finds this information interesting, but unconcerning, I would encourage you to think more broadly. These numbers are national numbers, but are they so much different for your employees? If you have employees who are working after 65 wouldn’t you rather they be doing so because they want to instead of have to work?
The answer to this problem lies in getting involved with your employees early to promote a culture of savings and financial wellness. Helping employees understand how to budget, save, and invest for an adequate nest egg is critical to not only a healthy retirement for the employee, but also for the health of the employer.
Give a shout to learn more about how we can help your firm.
For far too long, some might say from the very beginning, employers and employees have viewed their workplace benefits in silos. The company's Retirement Plan stood on one side and the Health Plan on the other. Separate and distinct with no overlap. Is that really how they should be viewed?
Probably not. When employees are financially secure, the positive benefits manifest in several areas. And it makes sense that they would. To presume that employees who are financially stressed outside on the job would leave all those stresses in the parking lot when they walk into work each day is simply naive. Moreover, those financial stresses can take on a physical toll.
Research from Prudential Retirement shows that financially stressed employees are
* 190% more likely to be depressed
* 88% more likely to be stressed overall
* 50% more likely to experience a disability claim
* 32% of Americans say that lack of money prevents them from living a healthy lifestyle.
What do these and other statistics like them mean for employers? Ignoring your employees Financial Security will harm you in other ways including increased health insurance costs as well as workers compensation costs. What's the answer? Pay people more money? Actually, no. The answer is to help employees gain control of their financial lives through better budgeting, planning, and other tools to put them in a better place.
Want to learn how? Give me a call!