EBRI: Employees Don’t Know What to Do With Their Savings at Retirement


EBRI - Savings at Retirement

EBRI: Employees Don’t Know What to do With Their Savings at Retirement. Employees are counting on their workplace retirement plan to provide a majority of their income in their post-career years. Problem is, they aren’t sure what the heck they’re actually going to do with their savings once they reach retirement.

That’s according to a new study from the Employee Benefits Research Institute (EBRI), which found that nearly a third of workers have zero ideas how to put their savings to work once their working days are behind them. Another third of employees said they’d roll their savings into an Individual Retirement Account (IRA). A quarter said they’d keep their money in their current employer’s plan. In addition, EBRI found that 1 in 3 retirees move their money out of their retirement plan on the advice of a financial advisor.

The EBRI survey findings clearly demonstrate an opportunity to educate retirement plan participants early and often about their distribution options at retirement, and how they can leverage those to transform a career’s worth of savings into income that will last them the rest of their lives.

For starters, help them understand their distribution options. Typically, they have four choices — leave their money in the plan, take payments in a lump sum, or in installments, and roll their money into an IRA. And don’t forget to remind them about required minimum distributions (RMDs), which they’ll be required to take at age 70 1/2 if they leave their savings in the plan or roll it into an IRA.

One big hurdle pre-retirees need to overcome is figuring out how much money they’ll need to support their lifestyle in retirement, and how to budget and stretch their savings to meet those expenses. So they need access to calculators and tools to help them determine their monthly expenses and where their income will come from, taking all sources into account, like their workplace retirement plan, any outside savings, and Social Security, for example. And they should plan to set aside some extra money for emergencies, too.

It’s also important to teach plan participants to watch out for fees and risks related to the options they choose. As the fate of the fiduciary rule gets tossed about like a dinghy lost at sea, workers are more vulnerable to falling prey to financial professionals who may not have their best interests in mind and don’t have to because currently, there are no legal ramifications for their behavior. However, moving their money to a “cheaper” option to access their savings could potentially cost retirement savers big time if they’re not careful. It’s all too easy in today’s environment for them to fall victim to a good sales pitch that may not actually serve their needs at all, simply because they don’t know any better. In this case, ignorance is not bliss. In fact, knowledge is power when it comes to protecting their retirement savings and making the right choices for their future financial well being.

A lot of financial planning goes into retirement. It’s not just a matter of saying to your employees, “it’s your last day of work, cash out your retirement savings and goes on your merry way.” They need to be educated on how to access their savings from the plan and make their money work for them throughout their retirement years while avoiding all-too-common — and potentially costly — pitfalls along the way. As a plan sponsor, you have an important role to play in helping them make the most of their savings so they can truly enjoy their “golden years.”

Robyn Kurdek

Robyn Kurdek

Freelance writer with nearly 2 decades of financial industry experience, with niche expertise in the defined contribution (DC) industry. I also have defined benefit (DB) plan knowledge. I write all types of content for retirement plan participants, sponsors and advisors, including web copy, newsletters, white papers, fact sheets, blog posts, financial wellness articles, and more. "I speak DC."
Robyn Kurdek

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