Retirement plan participants are cancelling illusions of grandeur about older age and leaning in on more practical considerations. There’s a growing focus on having enough savings to maintain a healthy and ordinary life without running out of money. What savers don’t know though, is: what’s enough? How can plan sponsors best help?
Financial Coaching—Beyond The Basics
Retirement industry surveys find 401k plan participants shifting perspectives, as they demonstrate less interest in extravagant lifestyles and more concern for the basics. There’s increased focus on maintaining current standards of living, planning for inflation, and ensuring money is available for the long haul. As one industry expert sums up: “For most Americans, living comfortably with the occasional splurge on their favorite activities or travel destinations is the ultimate goal in retirement…” This reality check shines the spotlight on the question: what constitutes enough. In other words, how much has to be saved to pave the path to a reasonably solid older age?
While it remains a responsibility of plan sponsors to communicate with participants about investment options and fees, industry experts say that those who really want to help savers need to go further.
If companies want to make an impressive effort to distinguish their retirement benefit, they will consider ways to include a personal trainer or coach as part of their drive toward employee fiscal fitness. This goes beyond the do-it-yourself nature of a tool kit.
“Hire an investment adviser and/or recordkeeping service provider that provides excellent retirement planning communications to participants,” says Douglas W. Hoefer, …at DWC… “The ‘better’ portion of the answer is employees having access to investment advisers on-demand or a scheduled one-on-one to prepare or review their realistic retirement strategy. Self-service solutions via retirement calculators and asset allocation models/target date funds are nice but are not better than an employee…having access to an expert that will help them with their retirement strategy and actually help them with their questions on investments.”
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With the growth in requests for plan materials in languages other than English over the past several years, be sure too that the ERISA requirement for providing assistance to non-English speakers is being met.
Simpler Approach: Forced Saving?
Providing a range of financial education, coaching and tools to meet the varying needs of plan participants is of course a challenge. Some of the experts at Fiduciary News propose a bit of a tough love alternative:
Of course, plan sponsors can simply scrap the whole idea of trying to convince employees to adjust their behavior to secure the ideal retirement. There’s a much simpler approach they can take. “Change plan documents to make participants save 15% and then have the sponsor can add 5%,” says Holmes Osborne of Osborne Global Investors in Santa Monica, California. “This would take most people to a comfortable retirement.” But would that make them happy?
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