Coach Your 50-Plus Employees to Retirement Savings Success. Your employees who are in their 50s and older are like the wise owls of your workforce: they are seasoned, have a lot of wisdom and experience, and are likely valuable contributors to your organization.
That said, for all of their experience in the workplace, they might need some help and advice when it comes to making the most of their remaining working years to build their nest egg for retirement. They may have less saved than the recommended six times their annual salary, according to Fidelity Investments. (By age 60, that number should be eight times). But that’s okay — there’s still time for them to catch up on their savings. And that’s where plan sponsors can help make an impact.
This article from Nasdaq offers several important tips for 50-plus workers to make the most of their workplace retirement plan as they approach the final years of their career. You can use these tips to coach your late-career employees and help them make a smooth transition to retirement:
Catch-up contributions – just do it: Individuals who will turn 50 during the year can make extra contributions to their 401(k). For 2018, the catch-up contribution limit is $6,000, on top of the $18,500 limits for “regular” deferrals. Encourage your employees who are age 50 or older to take advantage of this opportunity to save additional funds for retirement.
Save more: In addition to catch-up contributions, remind later-career employees to analyze their spending and find other ways to cut expenses so they can save even more for retirement.
Start thinking about an exit strategy: Employees who are age 50 and older should start thinking about how they will manage their taxes once they start receiving distributions from their retirement account. You can encourage them to talk to your plan’s financial advisor (if you have one) or their own advisor or CPA to get advice about how to minimize the tax hit on those withdrawals.
Understand the withdrawal options: Taxes are one thing, penalties are quite another. Help your employees understand the implications of early withdrawals from their retirement account, and educate them on how to access the money penalty-free. It’s possible for employees to withdraw funds from their 401(k) account without paying the 10% early withdrawal penalty if they access their savings after age 59 1/2, or if they separate from service anytime in the calendar year in which they turn age 55.
Consolidate those old accounts – pronto: If your employees have retirement accounts from former employers, encourage them to consolidate their assets into your organization’s plan. It makes it easier for them to keep track of their retirement assets all in one place, without having to manage all of the paperwork, tax forms, etc. from various providers. Not to mention having all of their money in a single account provides an opportunity for their savings to work even harder for them through the “magic” of compounding.
Get in on that employer match: If they’re not saving enough to be eligible for employer matching contributions, your older employees are missing out on a valuable opportunity to build up their savings. Make sure they’re aware of your plan’s matching formula and educate them on the importance of saving enough to get the match.
You can use all of these tips and others highlighted in the Nasdaq article linked above to help your employees who are age 50 and older get the most mileage out of the precious working years they have left before retirement. As a plan sponsor, you can be their co-driver, helping them stay on pace for a successful finish to their career and a picture-perfect life afterward in the retirement winner’s circle.
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