Tags: retirement | plan | stress | test

Time to Stress Test Your Retirement Plan

Time to Stress Test Your Retirement Plan
(Dollar Photo Club)

By    |   Friday, 14 April 2017 09:02 AM

What if you could offer every employee a substantially larger retirement account?

It could certainly make your firm a lot more attractive and generate quite a bit of buzz.

While you can’t guarantee that every employee will have enough to retire one day, data shows that well educated and engaged 401(k) participants can take small steps that can have a very large benefit over time. 

These increased benefits for employees do not necessarily mean you as employer will need to increase your costs of supporting the plan.

Improving employee confidence can pay important and measurable dividends. Improving investment outcomes can help employees be better prepared for retirement. Increasing employee retention helps reduce costs of hiring and training new employees.

All of these positive outcomes are possible with a well-run employer retirement plan.

Sadly, only 51% of workers express some level of confidence about their financial futures. 

Yet, for 70% of participants, the 401(k) is the only or primary source of retirement savings.

Learning how to make the right investments takes time. Between balancing all of the responsibilities of home and work, most employees have little time to seek out financial insight.

Retirement plan participants recognize the need for help. 

  • 61% would feel more confident about investment decisions if they had help from an investment professional.
  • 57% said they wish there were a better way to figure out how to choose investments.
  • 46% don’t know what their best options are.  

Managing a 401(k) account takes time, interest and knowledge. 

  • About half of participants say they lack time, interest and knowledge for managing their 401(k) accounts. 
  • 73% spend less than 8 hours per year on the task. 
  • 45% spend less than 4 hours per year.

Bottom line, lack of 401(k) investment education is a problem for many plan participants. 

Research also suggests that one proven way to improve employee morale is by helping them effectively plan and prepare for their retirement.

So, if higher morale helps improve the company’s bottom line, why isn’t every business working on this task?  Often it comes down to time—even in those organizations committed to providing retirement benefits.

The company simply doesn’t have the time, or the people with the required licenses, to provide the necessary resources, tools and education necessary. 

A total of 83% of plan participants are interested in professional investment management. 

Yet only 16% of plan sponsors plan to promote professional advice.  In fact, over 61% of employees surveyed said they would feel more confident about investment decisions if they had help from an investment professional.  

Structured properly, participant advice that arms participants with general investment information, such as guidance on asset allocation and appropriate contribution rates, can be an effective way to help participants make better decisions for their retirement.

One study demonstrated the impact of participant advice, education and counseling.

  • Participation rates rose 26%. 
  • Overall savings rates increased 55%. 
  • 41% of participants changed investment allocations as a result of advice.  

Consistent participant education and counseling is one hallmark of a well-designed, highly successful retirement plan.

Maybe it is time you sought out a service provider that can offer your plan the kind of participant advice, education, and counseling that will help you and your employees get the most from your retirement plan.

Eric Hutchinson is an author, speaker, a Certified Financial Planner™ practitioner, an Accredited Investment Fiduciary®, Chartered Life Underwriter® and Chartered Financial Consultant®. He has more than 30 years of experience working in financial planning, investments, estate planning and tax planning.

© 2020 Newsmax Finance. All rights reserved.

1Like our page
Managing a 401(k) account takes time, interest and knowledge. 
retirement, plan, stress, test
Friday, 14 April 2017 09:02 AM
Newsmax Media, Inc.
Newsmax TV Live

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved