Retirement – 4 Simple Strategies to Help Participants Save More. Most American workers are behind on their retirement savings, and many don’t realize it until later in their careers — some with just five to 10 years until they plan to retire. Moreover, only 60% of Americans say they feel confident they can retire comfortably, according to the Employee Benefit Research Institute (EBRI). About a quarter have less than $1,000 earmarked for their post-working years. And according to the National Institute on Retirement Security, almost 40 million households have no retirement savings at all. Among households age 55 and older, 29% have neither retirement savings nor a pension, according to the Government Accountability Office (GAO).
So how do you help employees who’ve fallen behind on saving for retirement? While the statistics may seem to paint a bleak picture, here’s some good news — it’s not too late. There are a few simple strategies you can use to help employees catch up, even if they’re close to retirement.
Strategy #1: Take advantage of catch-up contributions
Workplace retirement plans offer some great tax benefits, like the ability for workers to set aside pre-tax money from their paychecks. However, as a result, the IRS sets annual limits on how much employees can contribute. In 2018, the maximum contribution limit for most retirement plans is $18,500.
Once an employee reaches age 50, however, they can contribute even more. So if they’re going to celebrate their 50th birthday before the end of the calendar year, they can save an extra $6,000 in their retirement account in 2018. That means they can sock away as much as $24,500 for retirement next year — a significant saving.
Strategy #2: Encourage employees to make their money work for them
Your employees need to invest to grow their money. Financial experts recommend a diverse mix of stocks and bonds. Most people over 50 tend to shy away from stocks, but that can be detrimental to their ability to make their money work for them over time. Since 1926, the average annual return is 10% for stocks, 6% for bonds and 3% for cash. Encourage them to re-evaluate their current asset allocation to make sure it isn’t too conservative, or too risky, to keep them from reaching their retirement goals.
Strategy #3: Make sure they don’t dial up the risk too much
The last thing late-career workers should do is take too much risk with their savings. Going “all-in” and over-investing in stocks may not be in their best interest. While there’s lots of potential for significant growth and returns, there’s also the potential to lose money. The closer they get to retirement, the more important it is for them to preserve their savings and minimize losses. Again, encourage them to take a critical look at their asset allocation and make sure it’s on track to help them meet their retirement goals.
Strategy #4: Simplify by consolidating their retirement accounts
Urging your employees to consolidate their accounts in your retirement plan has several advantages. It provides an opportunity for them to diversify their investment mix and maximize their portfolio’s performance. In other words, it makes it easier for them to manage their investments and make sure they’re all working together.
Moreover, keeping their accounts “under one roof” may also help your employees save money by reducing investment and account management fees, and providing opportunities for potential tax savings, too. Finally, it can give them better planning power and simplify their retirement finances. Being able to see their entire savings and investment portfolio at a glance can help them plan more effectively for the future.
Whatever stage your employees may be at, it’s important for them to get started, right now. As the saying goes, there’s no time like the present. And putting aside as much as they can for retirement while they still can is the best gift your employees can give themselves.
