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Showing posts from October, 2015

15 Retirement Plan Points to Ponder

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Working with retirement plans is a complicated, challenging, and constantly changing process. That said, there are certain constants — and things that bear repeating and/or reconsidering from time to time. Here are a few points to ponder from my list of “constants”: 1. The key to successful retirement savings is not how you invest, but how much you save.   2. The vast majority (more than 90%) of participants defaulted in at a 6% deferral do nothing to change that default. Of those who do, about half actually increase that deferral rate.  3. Plan fiduciaries are responsible for every participant investment decision in plans that don’t comply with ERISA 404(c). Most plans don’t comply with ERISA 404(c).   4. Hiring a co-fiduciary doesn’t make you an ex-fiduciary. 5. “Because it’s the one my record keeper offers” is not a good reason to choose a target-date fund.   6. Given a chance to save via a workplace retirement plan, most people do. Without a workplace retirement plan, mos

4 Reasons Why Plan Sponsors Should Care About the Fiduciary Proposal

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As I talk to retirement plan advisors and plan sponsors around the country, there seem to be three camps of thought on the Labor Department’s fiduciary reproposal: those who think it will be a big deal; those who think it will be a big deal but manageable (once certain key issues are addressed); and those who are nearly completely oblivious as to the proposal, its potential impact or its current status. Unfortunately for advisors in the first and second category, nearly all plan sponsors seem to be in the third group. Here’s why plan sponsors should care about the proposal. You might have to change your plan education materials. Remember back when your plan education materials only had generic fund references, and your participants struggled to figure out which of the specific funds on their plan menu were supposed to match up with those colored pie chart pieces? Remember how frustrated they were when you couldn’t tell them? And how poor the results were? Perhaps not, bec

4 Reasons Why Plan Sponsors Should Care About Outcomes

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It’s obvious why participants have a vested interest (literally) in the retirement income — the outcome, really — of their retirement savings plans. Here are four reasons why plan sponsors should care about outcomes. You want your employees to appreciate your benefit plan(s). If you’re responsible for benefit plans in your organization, you have a very real interest in how your workforce (and management team) view those benefits. Plan sponsors have long used participation rate as the plan success metric — after all, what better measure of success in plan design, education and communication than the objective data as to how many employees have chosen to participate. But in a time when a growing number of plans have adopted automatic enrollment — well, while credit is certainly due plan sponsors who have taken that step, the resulting bump in participation rates owe more to the inertia of human behavior than innovative plan design. There is, however, little question that the bet

5 Reasons Why Your Small Business Should Offer a Retirement Plan

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People who don’t have access to a plan at work don’t save for retirement. Here’s why small business owners should care. About half of private sector workers did not participate in a workplace retirement savings program in 2012, and a recent report by the Government Accountability Office (GAO) found that most workers who did not have coverage lacked access to such programs. While there are many reasons that might account for those individual decisions, among those not participating, the majority worked for an employer that did not offer a program or they were not eligible for the programs that were offered. In particular, lower income workers and those employed by smaller firms were much less likely to have access to programs, after controlling for other factors. However, the majority of these workers participated when they had workplace access. Here’s why small businesses should provide that access. To attract and retain workers. Okay, every time somebody talks about the rea

5 Things Millennials Need to Know About Saving for Retirement

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Retirement seems a long time off — particularly when you’re young. However, Millennials — generally defined as those born between 1978 and 2004 — are living longer, and many will have to finance retirements that are actually longer than their working careers. So, while it can hardly be expected to be top-of-mind for most of this group, here are five things worth knowing about saving for retirement — now. 1. Social Security won’t be as much as you think it will be. Okay, some of you don’t think it will be anything at all, certainly not by the time that you are old enough to collect. But set aside for a moment the questions you may have as to whether or not Social Security is financially viable without reform, or if you should even count on it at all. Your parents — who are either now, or soon hope to be, collecting Social Security — had the same concerns, after all. However, even if you assume that the program remains largely unchanged from what it pays today, if you retire at