Despite the hard work of retirement plan sponsors across the country, only a relatively small percent of Americans have financial plans for retirement. Meanwhile, only a tiny percentage of those who have retired describe themselves as “living the dream.” Clearly, access to retirement planning services and financial education are critical components of retirement plans.
Some Good News
According to 401k Specialist, 28% of small business owners reported augmenting benefits to attract and retain talent as a result of the pandemic. Specifically, 27% are adding a retirement matching contribution, financial wellness program and/or retirement account. This is indeed good news, given the depth of challenges the average worker faces on the path to retirement. For example, according to a new Schroders survey, among those who have retired: “Just 3% described their situation as ‘living the dream,’ while some 37% said they are comfortable. Another 37% said retirement is ‘not great, not bad,’ and 18% are struggling. This leaves 5% ‘living the nightmare’…”
Failure to plan for retirement, realistically, and with expert help, remains a root problem. The Schroders survey found that only 23% of respondents have a written retirement plan guiding their decisions-while 37% have not done any planning and find the idea of planning overwhelming, especially amidst so much uncertainty. On the other hand, those who have a plan say it has been useful on the path to a better retirement.
For many retirees, a big challenge is having higher than anticipated expenses. Taking the survey results as a whole, one Schroders leader concludes that retirement plans must do more to assist with planning and education:
“Given the relatively small percentage of Americans who have taken the time to create a specific plan for generating enough assets for retirement, it’s not surprising to see that many believe a dream retirement is out of reach…As an industry, we need to drive the benefits of planning, of investor education, of starting sooner to save in defined contribution plans and IRAs and investing for growth. Investors have to understand how the money they save now will drive income in retirement. This is especially important during times of great volatility like today that can shake anyone’s confidence and compel investors to leave the market. The good news is, it’s never too late to embark on the planning process and improve your retirement readiness…”
Indeed, it seems that well run company sponsored 401k plans have an ever more critical role to play. Experts encourage maximizing the appeal of retirement plans to workers by ensuring the plan responds to the current needs and interests of workers. Research has shown for example, that because employees are increasingly concerned about financial wellbeing, they are eager for more guidance from qualified financial advisors, the latest educational resources, and, effective online planning tools.
Retirement plan sponsors, whether new to the role or charging forward with enhancements, are advised to remember the continuous fiduciary responsibility of ensuring all participants are benefitting from the plan. As such, it is critical to revisit risk management plans periodically—ensuring all appropriate coverage is in place and current. Let Colonial Surety Company help. Just select an affordable, package and receive a three point coverage solution—in minutes:
1.The ERISA bond required to protect the assets of the retirement plan from theft.
2.Fiduciary Liability coverage to protect you from personal liability.
3.Cyber Liability coverage to safeguard your company and plan from covered losses and expenses in the event of a cyber breach.
The timing is ripe for small business owners to develop new benefits strategies: workers are at the ready. Summing up key findings from a Harris Poll study, the National Association of Retirement Plan Advisors (NAPA) reports: “When asked about the importance of salary versus benefits, 51% of respondents agreed that salary is the most important deciding factor when weighing a new job opportunity, compared with 49% who agreed that benefits and financial wellbeing are the most important…64% … are looking for more out of their benefits than what their employer currently offers.”
Auto-enrollment and employer matches are proven strategies for increasing employee well-being—and retention. Given the intense scrutiny on how the investment options offered participants are selected, benchmarked, and, if warranted, removed from the plan, it’s also important for plan sponsors to protect themselves. Under the high standards of ERISA law, failure to act can result in allegations of a fiduciary breach. Plan sponsors can affordably mitigate their risks with fiduciary liability insurance from Colonial Surety. Our annual premium is less than just one hour with an expert ERISA lawyer if disaster strikes—and cyber liability insurance is included.
Colonial Surety Company is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed and in business all across the country. Serving customers since 1930, we are the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. With a Trustscore of 4.8, we help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time.