Frequently Asked Questions
What is the biggest challenge facing retirement plan sponsors today?
Trisha: Time. I think today's HR and Finance executives have more to do in their daily jobs than they did 20 years ago. Given the time constraints associated with their jobs, imagine also having to know all aspects of retirement plans too. Plan Committee Members spend about 8 hours per year attending committee meetings making decisions that affect every single employee now and far into the future.
The best advice I could give a plan sponsor is to choose your partners wisely. Get the best advisory firm you can. Get a specialty consultant when you need one. Hire a good ERISA attorney and have their phone number at the ready. Use a dedicated, results oriented financial education group. An experience plan auditor can provide a wealth of insight—often they are unsung heros! And last but not least, select a quality plan provider/recordkeeper. This team should be at the beck and call of the plan sponsor for any plan issue. Making smart decisions about who the committee relies on will pay off in a myriad of ways, for the employer, the committee and the employees.
What is the No. 1 concern of upcoming retirees?
Karen: The question we hear the most is: Will I have enough money to live throughout my retirement? As the retirement plan arena has evolved dramatically over the last three decades, employees are saving for their retirement through employer-sponsored plans, such as 401(k) plans. With these plans, employees determine what percentage of their pay they would like to contribute to the plan to fund for their retirement. Unfortunately, employees have tendency to have an inconsistent contribution history throughout their careers. Life events happen in which household budgets tighten and retirement contributions are affected. Employees tend to think they are savings at an acceptable rate to fund their retirement “someday”. However, when the reality of retirement begins to loom ahead, they start to question whether or not they will have enough retirement income to live comfortably through retirement.
Many employees do not sit down and put pen to paper to ensure that retirement budget is realistic compared to their retirement dollars. We help them discover what their income and expense needs will be and help them put together a budget for retirement.
The time to determine this mathematical equation is not at retirement but well before. Based on what employees believe they will have as retirement income has to be adjusted for income tax payments that will be paid on these monies, the cost of inflation that will shrink the future buying power of these dollars, retiree healthcare costs, and investing these dollars as a long-term planning tool. We walk them through these issues step by step.
About 25% of plan sponsors don't have a plan advisor. Why is that?
Some large companies have a robust investment department inhouse and the investment review is covered by them. In other instances, the company just hasn't yet hired a firm, and we see a definite rise in the percentage of firms that want to explore that. The trend toward hiring a plan advisor is clear. More employers see the value a good plan investment advisory team can bring.