Employees Want Money More than Perks

Have you been trying to leverage your employee benefits as a way to attract and retain talent? Take a look at this great article from Benefits Pro about how employees still value money over the perks of employee benefits  Marlene Y. Satter.

There’s plenty of talk these days about all sorts of employee benefits that might help to attract and retain top talent — but when push comes to shove, it’s the dollar sign that has the most influence.

That’s according to a Paychex.com survey, which finds that in the employment conversation, money still talks the loudest. It’s not that people don’t want or like other benefits, such as health insurance, vacations and 401(k)s, but what they really want, what they really, really want is cold hard cash in the form of bonuses and raises. Regular bonuses, they say, are the most important job incentive.

However, asked about the benefits they do receive, survey respondents list a range of benefits, including health care, dental insurance, 401(k)s, casual dress days and free snacks, but bonuses only come in at eighth place. Least important to them of all are “nomadic days” — days on which they can work away from the office at the location of their choice.

Asked their salaries and which benefits they’d gladly give up in exchange for more money, there are quite a few — with low-cost benefits the most disposable. Millennials, perhaps unsurprisingly, make the least money at less than $47,000 a year, while boomers come in second (despite their longevity on the job) at just over $49,000 annually; GenXers are the best paid, at an average of more than $53,000.

And they all know the value of a buck. The top five most expendable benefits named are free coffee or snacks; casual dress days; company events or outings; discounts on company products; and discounts on other products. In fact, such “benefits” may actually backfire if companies think offering them instead of merit-based compensation or bonuses to induce greater productivity.

There’s certainly a disconnect between what employees say they value most and what employers believe are the most valuable options, with employees saying the most important to them are monetary bonuses, additional paid vacation time, and health and dental insurance.

Bosses, on the other hand, think employee morale benefits more from paid vacations, bonuses and finally paid maternity leave and vision and dental insurance.

To show how out of touch employers can be, employers rate health care just above lunch breaks in terms of morale-boosting importance, despite its value to employees.

Considering that low-wage jobs are associated with higher rates of employee turnover, the study points out that providing employees with a salary increase could cut the costs associated with recruitment and training.

Of course, smaller companies tend to offer fewer, and less expansive, benefits than larger companies, with employers of fewer than 100 more likely to offer employees casual dress days or free snacks than they are to provide them with the considerably more important benefit of health insurance. But on the flip side, smaller companies are also more likely to offer bonuses than are larger companies, and indeed employees rank those bonuses above health care, dental insurance, and 401(k) plans in importance.

And the benefits on offer could depend on the age of the boss, with millennials more willing to offer employees commission and sales bonuses, paid gym memberships and student loan reimbursement while Gen Xers hit on all cylinders in offering bonuses, paid maternity leave and on-site health and wellness services.

Boomers, alas, seem stuck in the dark ages when it comes to modern benefit offerings, reluctant to see the benefit of such perks as bonuses, nomadic days and paid maternity leave; in addition, they’re really resistant to such things as student loan reimbursement and paid professional development.

See the original article Here.

Source:

Satter M. (2017 April 28). Employees want money more than perks [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/04/28/employees-want-money-more-than-perks?ref=hp-news&page_all=1

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Starting Early is Key to Helping Younger Workers Achieve Financial Success

Starting early is the best way to ensure dreams for life after work are realized, but when TIAA analyzed how Gen Y is saving for retirement, it found 32 percent are not saving any of their annual income for the future.

Knowing the importance of working with young people early in their careers to educate them about the merits of saving for a secure financial future, here are some approaches tailored to Gen Y participants:

  • Encourage enrollment, matching and regular small increases – Enrolling in an employer-sponsored retirement plan is a critical first step for Gen Y participants. Contributing even just a small amount can make a big difference, especially since younger workers benefit most from the power of compounding, which allows earnings on savings to be reinvested and generate their own earnings.

    Encouraging enrollment also helps younger workers get into the habit of saving consistently, and benefit from any matching funds. Emphasize the benefits of employer matching contributions as they help increase the amount being saved now, which could make a big impact down the line. Lastly, encourage regular increases in saving, which can be fairly painless if timed to an annual raise or bonus.

  • Help younger workers understand how much is enough – We believe the primary objective of a retirement plan is offering a secure and steady stream of income, so it’s important to help this generation create a plan for the retirement they imagine. Two key elements are as follows:
    • Are they saving enough? TIAA’s 2016 Lifetime Income Survey revealed 41 percent of people who are not yet retired are saving 10 percent or less of their income, even though experts recommend people save between 10 to 15 percent.
    • Will they be able to cover their expenses for as long as they live? Young professionals should consider the lifetime income options available in their retirement plan, including annuities, which can provide them with an income floor to cover their essential expenses throughout their lives.

      Despite the important role these vehicles can play in a retirement savings strategy, 20 percent of Gen Y respondents are unfamiliar with annuities and their benefits.

  • Provide access to financial advice – Providing access to financial advice can help younger plan participants establish their retirement goals and identify the right investments. By setting retirement goals early, and learning about the appropriate investments, Gen Y participants can position themselves for success later on.

    The good news is TIAA survey data revealed Gen Y sees the value financial advice can provide, with 80 percent believing in the importance of receiving financial advice before the age of 35.

  • Understand the needs of a tech-savvy and digitally connected generation – It’s important to meet this generation where they are—on the phone, in person or online. We’ve learned that this generation expects easy digital access to their financial picture, and we offer smartphone, tablet and smartwatch apps in response.
    • Engage Gen Y with digital tools - Choose ones that educate in a style that does not preach and allows them to take action. One way to reach Gen Y on topics such as retirement, investing and savings is through gaming.

      We’ve found that the highest repeat users of our Financial IQ game are ages 24-34, and that Gen Y is significantly more engaged with the competition, with 50 percent more clicks.

Perhaps more than any other generation, Gen Y needs to understand the importance of saving for their goals for the future even if it’s several decades away.  Employers play an integral role in kick-starting that process: first, by offering a well-designed retirement plan that empowers young people to take action; and second, by providing them with access to financial education and advice that encourages them to think thoughtfully about their financial goals—up to and through retirement.

See the original article Here.

Source:

McCabe C. (2017 April 14). Starting early is key to helping younger workers achieve financial success[Web blog post]. Retrieved from address https://www.benefitspro.com/2017/04/14/starting-early-is-key-to-helping-younger-workers-g?ref=hp-in-depth&page_all=1

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Employers and the ACA – Its Status Quo for Now

With the passing of the AHCA, the ACA is now the norm for employers' healthcare. Find out what employers need to know about ACA and how it will affect them in the future in this interesting article from Think Hr by Laura Kerekes.

The Trump administration’s effort to repeal and replace the Affordable Care Act (ACA) through legislation failed last month when House Republicans were unable to push their proposal forward. The proposed bill, called the American Health Care Act, would have eliminated most of the ACA’s taxes and fees on health plans along with removing penalties on large employers that did not offer coverage to their full-time workers. It is unclear whether Congressional leaders will make another attempt to legislate major changes in the ACA this year. Meanwhile, federal agencies under President Trump’s direction may begin to take steps to revise regulations that do not require changes in law.

The situation certainly has caused some confusion among employers, so it is important to note that, as of now, nothing has changed. The ACA’s existing rules for group health plans, required notices, and employer reporting duties remain in effect. Applicable large employers (ALEs), generally entities that employed an average of 50 or more full-time-equivalent employees in the prior year, are still subject to the ACA’s employer mandate or so-called “play or pay” rules.

As a reminder, here is a brief summary of the key ACA provisions that require action by employers:

Notices:

  • Employer Exchange Notice: Provide to all employees within 14 days of hire.
  • Summary of Benefits and Coverage (SBC): For group medical plan, provide SBC to eligible employees at enrollment and upon request.

Health Plan Fees:

  • Patient-Centered Outcomes Research Institute (PCORI): For self-funded group health plans, pay small annual fee by July 31 based on prior year’s average participant count.
  • Transitional Reinsurance Program (TRP): For self-funded plans that provided minimum value in 2016, annual fee was due by January 15, 2017 (or by January 15 and November 15, 2017 if paying in two installments).

Reporting:

  • W-2 Reporting: Report total cost of each employee’s health coverage on Form W-2 (box 12). This is informational only and has no tax consequences. (Employers that filed fewer than 250 Form W-2s for prior year are exempt.)
  • Forms 1094 and 1095: ALEs only: Report coverage offer information on all full-time employees. Self-funded employers only (regardless of size): Report enrollment information on all covered persons.

Employer Mandate (“Play or Pay”): ALEs only. To avoid the risk of penalties, determine whether each employee meets the ACA definition of full-time employee and, if so, offer affordable minimum value coverage on a timely basis.

In summary, employers are advised to continue to comply with all ACA requirements based on the current rules.

On a related note, the ACA imposes several requirements on group health plans, whether provided through insurance or self-funded by the employer. Insured plans also are subject to the insurance laws of the state in which the policy is issued. In many cases, provisions matching the ACA are now embedded in state insurance laws. So future changes in the ACA, if any, may not apply to group medical policies automatically. Depending on the state and the type of change, additional legislation at the state level may be needed to enact the change.

See the original article Here.

Source:

Kerekes L. (2017 April 14). Employers and the ACA - it's status quo for now [Web blog post]. Retrieved from address https://www.thinkhr.com/blog/hr/employers-and-the-aca-its-status-quo-for-now/

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From Boomers to Millennials, Here are Workers’ Top 6 Benefit Needs

Do you know which benefits your employees crave the most? Take a look at this great article from Hr Morning about the top employee benefits for each age group by Jared Bilski.

Depending on which demographic they fall into (Baby Boomer, Gen-X, Millennial, etc.), employees have vastly different benefit needs. So why do so many employers offer a one-sized-fits-all benefits package?  

At the 2017 Mid-Sized Retirement & Healthcare Plan Management Conference in Phoenix, AZ, President and CEO of Cowden Associates Inc., Elliot N Dinkin, used the flexibility of the benefits offered through a private exchange as a reason for employers to give the exchange option a serious look.

Private exchanges — like public exchanges — are online marketplaces employers can use to provide coverage to their employees on everything from traditional benefits, like health insurance, to increasingly popular voluntary plans, like life, disability or cancer insurance.

Dinkin also used some compelling research to show just how greatly employees’ benefits needs varied from generation to generation.

Citing stats from a recent LIMRA study, which asked employees to rank their benefit needs, Dinkin laid out the top six responses of workers from 34 and under to employees 65-plus.

It’s worth noting that base pay was the top “need” for each and every employee demographic. The rest of the responses, however, were all over the map.

34 and under

The youngest workers in the study ranked their benefits needs in the following order:

  1. base pay
  2. career opportunities
  3. retirement plan
  4. low healthcare costs
  5. bonus/incentive, and
  6. flexible schedule.

35-49

The mid-life workers prioritized their benefit needs like this:

  1. base pay
  2. retirement plan
  3. low healthcare costs
  4. bonus/incentive
  5. paid time off (PTO), and
  6. flexible schedule.

50-64

Workers entering the latter stage of their careers ranked their benefit needs like this:

  1. base pay
  2. retirement plan
  3. low healthcare costs
  4. bonus/incentive
  5. paid time off (PTO), and
  6. type of work.

65-plus

Older workers tend to place a premium on the type of work they’re doing and the reputation of their employers. Their priorities are as follows:

  • base pay
  • retirement plan
  • type of work
  • bonus/incentive
  • low healthcare costs
  • working for a respectable organization.

See the original article Here.

Source:

Jared Bilski (2017 March 31). From boomers to millennials, here are workers' top 6 benefits needs. [Web blog post]. Retrieved from address https://www.hrmorning.com/from-boomers-to-millennials-here-are-workers-top-6-benefit-needs/

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3 Aspects of the GOP Healthcare Plan that Demand Employers’ Attention

The House of Representatives last week passed the American Health Care Act (AHCA) bill to begin the process of repealing the ACA. Find out what this new legislation means for employers in the great article from Employee Benefits Adviser by Daniel N. Kuperstein.

The extremely emotional journey to repeal (more appropriately, to “change”) the Affordable Care Act reached a significant milestone this week: The Republican-led House of Representatives passed an updated version of the American Health Care Act. While more than 75% of the provisions of the ACA remain intact, the AHCA gutted or delayed several of the ACA’s taxes on employers, insurers and individuals.

So what does this mean for employers?

First off, it’s important to remember that this new bill is not law just yet. The House version of the bill now heads to the Senate, where there’s no guarantee that it will pass in its current form; the margin for victory is much slimmer there. Only three “no” votes by Senate Republicans could defeat the bill, and both moderate and conservative Republican lawmakers in the Senate have expressed concerns about the bill. In other words, employers don’t have to do anything just yet, but it’s still beneficial to understand the major changes that could be coming down the pike.

As employers know from working over the last seven years to implement provisions of the ACA, there will be a million tiny details to work through if the AHCA becomes law.

But for now, we see three major aspects that demand employers’ attention.

There will be more emphasis on health savings accounts
Under the AHCA, health savings accounts will likely become far more popular — and more useful. The HSA contribution limits for employers and individuals are essentially doubled. Additionally, HSAs will be able to reimburse over-the-counter medications and allow spouses to make catch-up contributions to the same HSA. Of course, with this added flexibility comes increased responsibility — there will be a greater need for employees to understand their insurance.

There will be more flexibility in choosing a benchmark plan
For larger employers not in the small group market, the AHCA creates an opportunity to choose a benchmark plan that offers a significantly lower level of benefits to employees.

Currently, the ACA provides that employer-sponsored self-insured health plans, fully-insured large group health plans, and grandfathered health plans are not required to offer EHBs. However, these plans are prohibited from imposing annual and lifetime dollar limits on any EHBs they do offer. For purposes of determining which benefits are EHBs subject to the annual and lifetime dollar limits, the ACA currently permits employers sponsoring these types of plans to define their EHBs using any state benchmark plan. In other words, employers are not bound by the essential health benefits mandated by their state and can pick from another state’s list of required benefits.

Under the AHCA, we may see a big change to how the rules on annual and lifetime limits work. Notably, nothing in the AHCA would prohibit employers from choosing a state benchmark plan from a state that had obtained an AHCA waiver, which would allow the state to put annual and lifetime limits on its EHBs. This means that, if one state decides to waive these EHB requirements, many employers could decide to use that lower-standard plan as their benchmark plan. Of course, while choosing such a benchmark plan may benefit an organization by lowering its costs, such a move may have a negative impact on its ability to recruit and retain the best talent.

There will be a greater need to help employees make smart benefits decisions
The most important aspect of this for employers is to understand the trend in health insurance, which is undeniably moving in the direction of consumerism.

The driving philosophy behind this new Republican plan is to place more responsibility on individuals. However, this doesn’t mean employers can throw a party and simply wish their workers “good luck” — employers need to think at a macro level about what’s good for business. In a tightening labor market in which so many talented people consider themselves free agents, smart employers will focus on helping employees to make smart decisions about their health insurance.

See the original article Here.

Source:

Kuperstein D. (2017 May 5). 3 aspects of the GOP healthcare plan that demand employers attention [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/opinion/3-aspects-of-the-gop-healthcare-plan-that-demand-employers-attention

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Understanding the Evolution of Health Insurance in a Post-ACA World

With the fall of the AHCA, are you wondering where you are left standing with healthcare? Check out this great article from Benefits Pro on what the fall of the AHCA means for employers and how to proceed with healthcare from here by Eric Helman.

While much has been written about specific aspects of the ACA and how repeal, replace and repair will affect certain populations, the impact on employer-sponsored benefits is more convoluted.

In the world of employee benefits, to properly understand the post ACA world, we must reflect on the confluence of how five separate constituents react to the new health insurance landscape.

The issues and priorities of these five groups: government, carriers, employers, employees, and brokers/consultants, and how they relate to each other will dictate the evolution of health insurance in the post-ACA world.

These insights will illuminate what to expect in a post-ACA climate as the health insurance landscape continues to evolve under President Trump.

Government compliance issues ease

While we all may be a bit weary from the focus on Washington, the fact remains the federal government continues to be the single biggest catalyst for changes in the health insurance and benefits landscape.

For benefits professionals, it is important to recognize that for all the politicization around ACA, there is very little focus on the employer-provided benefits space, especially outside of the realm of small employers. The priority for government involvement in repeal-replace-repair is the individual market and Medicaid expansion.

Having said this, if the Republicans choose to use reconciliation to repeal the ACA with a simple majority, many aspects of the employer-provided system will be affected. Unfortunately, this will perpetuate the preoccupation with compliance in the employer space, continuing the trend of non-value add expenditure of resources that has plagued the industry for the last five years.

Carrier mandates relax

Perhaps surprisingly, the second area of significant change in the post-ACA era will be in the domain of the carriers. Against the backdrop of the Department of Justice opinions on the two proposed mega-mergers, we expect the greatest impact of repeal-replace-repair will manifest itself in the proliferation of new products which were “non-compliant” under the ACA.

Whether correct or not, one of the indictments of the ACA is increased mandates do more to destroy markets in terms of access and affordability than they do to advance these objectives.

Look for the relaxation of these mandates and the commensurate acceleration of new product development which will inevitably follow. Combined with the return of premium reimbursement plans in the small market, we expect the further commoditization of major medical insurance as low risk consumers choose less coverage for less premium.

Employers reallocate benefits compensation

Second only to the carriers, the employers have been the biggest victims of the ACA era. While many have applauded the decline in the rate of health care inflation, the reality is that benefits costs continue to grow more than inflation, placing an ever-increasing burden on total compensation planning.

Add to this the increased cost of compliance in an environment where employers are trying to reduce administrative costs in the face of a slow growth economy and you can understand the “ACA fatigue” many employers report.

Repeal-replace-repair, while it will bring uncertainty in the near term, is likely to lower the burden on employers and allow more strategic thinking about how they allocate compensation to benefits.

The increasing age diversity of their employees will force them to consider altering this allocation in favor of financial wellness (retirement and student debt) perhaps at the expense of traditional health benefits. The war for new talent precipitated by near full employment in skilled professions will only exacerbate this tension.

Employees wise up on benefit choices

For employees, the impact of the politicization of health care will continue to cloud their perception of their role in choosing and consuming the benefit programs offered by their employers.

While much has been written about the promise of “consumerism” to change the hyper-inflationary nature of fee-for-service health care, it is apparent that the deadly combination of employee illiteracy and entitlement about employer-provided health insurance is a greater impediment to real reform in the way health care is consumed in this country.

With the potential deregulation on mandated benefits and the increasing availability of retail health care alternatives, it will be incumbent on all the constituents to accelerate the employees’ education and appreciation for employee benefit choices customized to their informed perception of need and risk mitigation.

Brokers/consultants rise to the challenges

And now, the elephant in the room, the impact on brokers and consultants. One of my early mentors said, “There is profit in confusion.” For the skilled practitioners, I think they would agree that the net effect of the ACA was increased opportunity. It is important to note however, that this opportunity required focus on new disciplines.

No longer were the skills of customer relationship management, procurement management and vendor management sufficient to satisfy the needs of their clients. The best players were forced to develop expertise in compliance, regulatory impact, benefits technology and internal human resources processes that their predecessors could ignore. This, the low cost of money and the aging workforce of benefit producers has contributed to the continued wave of firm consolidation which changes the nature of competition.

Additionally, the widely publicized fall of market disruptors will have a chilling effect on innovation for the near term. In the post-ACA era, benefits professionals will be challenged to balance revenue, client retention and cost-of-service pressures in an environment where the future is uncertain.

The post-ACA era promises to be as exciting as the last five years. To paraphrase Richard Epstein on a separate topic, the real dilemma is that the people working on the problem lack the technical expertise and the political agnostic orientation necessary for real change.

In the meantime, successful participants in this marketplace will be forced to be both diplomats and opportunists, acutely aware of the issues and priorities facing all of the important constituents and balancing these to the most optimum outcome. I, personally, am comforted that we have some of the most creative people I know working on this challenge.

See the original article Here.

Source:

Helman E. (2017 April 7). Understanding the evolution of health insurance in a post-ACA world [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/04/07/understanding-the-evolution-of-health-insurance-in?t=core-group&page_all=1

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5 Benefits Communication Mistakes That Kill Employee Satisfaction

Are you using the proper communication channels to inform your employees about their benefits? Take a look at this great article from HR Morning about how to manage to communicate with your employees to keep them satisfied at work by Jared Bilski.

Good benefits communication is more important than the actual benefits you offer – at least when it comes to employee satisfaction.
Proof: When a company with a rich benefits program (i.e., better than industry standard) communicated poorly, just 22% of workers were satisfied with their benefits.

On the other hand, when an employer with a less rich benefits program communicated effectively, 76% of employees were satisfied with the benefits.

These findings come from a Towers Watson WorkUSA study.

At the at the 2017 Mid-Sized Retirement & Healthcare Plan Management Conference in Phoenix, AZ., Julie Adamik, the former head of Employee Benefits Training and Solutions at PETCO, highlighted the five most common benefits communication mistakes that put firms in the former category.

Satisfaction killers

1. The information is boring. Many employees assume that if the info is about benefits, it’s probably boring. As a result, they tend to tune out and miss critical material.

2. The learning styles and preferences of different generations aren’t taken into account. With multiple generations working side-by-side, a one-size-fits-all approach is doomed to fail.

3. The budget is too low. If your company has a $15 million benefits package, you shouldn’t accept upper management’s argument that a $2,500 communication budget should cover it. HR and benefits pros need to take a stand in this area.

4. The language is “too professional.” Assuming that official-sounding language is better than “plain speak” is a common but costly communication mistake.

5. There’s too much information being covered. Cramming everything into a single open enrollment meeting is guaranteed to overwhelm employees.

Cost, wellness, personal issues and care

Employers also need to be wary of relying too heavily on tech when it comes to benefits communication. Even though there are plenty of technological innovations in the world of benefits services and communications, but HR pros should never forget the importance of old-fashioned human interaction.

That’s one of the main takeaways from a recent Health Advocate study that was part of the whitepaper titled “Striking a Healthy Balance: What Employees Really Want Out of Workplace Benefits Communication.”

The study broke down employees’ preferred methods of benefits communications in a number of areas. (Note: Employees could select more than one answer.)

When asked how they preferred to receive health cost & administrative info, the report found:

  • 73% of employees said directly with a person by phone
  • 69% said via a website/online portal, and
  • 56% preferred an in-person conversation.

Regarding their wellness benefits:

  • 71% of employees preferred to receive the info through a website/online portal
  • 62% said directly with a person by phone, and
  • 56% preferred an in-person conversation.

In terms of personal/emotional wellness issues:

  • 71% of employees preferred to receive the info directly with a person by phone
  • 65% preferred an in-person conversation, and
  • 60% would most like to receive the info via a website/online portal.

Finally, when it came to managing chronic conditions:

  • 66% of employees preferred to receive the info directly with a person by phone
  • 63% would most like to receive the info via a website/online portal, and
  • 61% preferred an in-person conversation.

See the original article Here.

Source:

Bilski J. (2017 April 4). 5 benefits communication mistakes that kill employee satisfaction [Web blog post]. Retrieved from address https://www.hrmorning.com/5-benefits-communication-mistakes-that-kill-employee-satisfaction/

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Do You Know What Your Retirement Plan Is?

"People don’t plan to fail they fail to plan. Retirement is about what you want out of life, what do you need to do to sustain the lifestyle you have become accustomed too? Unfortunately, most people in America never really retire because they have not planned properly. Retirement is a process that begins in your 20s, 30s, 40s.” - Garry Rutledge, Saxon Partner.

CIO

The biggest hurdle of retirement is getting something started. Getting a start on retirement early in life will provide a massive amount of appreciation over time. Even if only a small amount is put away early in life, compound interest will do much of the work. Here are some other ways to begin building your retirement funds.

20s

In your 20s, time is your biggest ally when it comes to saving for retirement. Many people in their twenties are just getting out of school and excited to live life rather than thinking about putting something away for retirement that seems so far down the road.

Investigate any company options

Consider employer sponsored plans available- 401k, 457, 403(b) – different sectors of the economy have different company sponsored retirement plans.

Know where you are headed.

  • Only 48% of people have even bothered trying to figure out how much they need to retire comfortably, according to the Employee Benefit Research Institute's 2015 Retirement Confidence Survey.
  • The rule of 72 is a math rule that determines how long it will take to double funds for any given rate of return. The amount returned divided by 72 would be the amount of time it takes to double your money. Ex. If your money is in a savings account earning three percent a year, it will take twenty-four years to double your money (72/3=24).

Save outside of work

  • A Roth is a type of retirement account that grows tax free meaning you only pay taxes on the money going into the account.
  • "I would heavily encourage a Roth, I am very pro Roth IRA versus the traditional tax deferred plan,” Garry advised. “The best analogy I can make to this is: 'would you rather pay taxes on the crop you harvest or would you rather pay taxes on the seeds you plant?' What this really means is that you can take a small handful of seeds and plant a crop that will amount to a huge harvest."

30s

It is about late 30s when people begin to realize retirement is not that far away. This is the time in life that people are thinking about beginning families and having kids, it is also the point in life that you can start understanding what realistic retirement goals look like. "In my 28 years of experience," Garry explained, "most people don't start planning for retirement until their late 30s." Whether you're already saving or just starting now, carrying good habits throughout your 30s can pay off in the future.

Company sponsored plans are key

  • If you are just beginning in 30s, consider company sponsored plans that will have a match of a percentage of one’s salary. That translates into a 100% return on your money and you haven't done any investing yet.
  • If you are already contributing into your company's plan, make small increases each year to work towards your savings goal.

Keep it balanced

  • "The 'perfect retirement plan' would have the perfect balance of pretax contributions, meaning before tax qualified plans and after tax contributions (brokerage accounts or Roth IRAs) allow both plans to complement each other."

College is important, but retirement comes first

  • A lot of people try to begin planning for their children's college at this point but retirement planning should come before planning for college. After all, people won't lend you money to retire with.

40s/50s/60s

The biggest thing at this point in life is "Do you know what your plan is and are you on track?" If you build a house, you start with a plan. Same is true for retirement.

This is the time to be deciding if you are on track for retirement. Do you have a plan and a budget? Have you created a financial plan? Do you know how you want to retire? Your perspective of what retirement looks like is truly your reality.

The closer you get to 65, the retirement age, more alarms that are beginning to go off. If you haven't done anything at this point you must take a serious look at what your plans are

Slow and Steady

  • If you've been planning and following a plan, keep up the good work! The only way to eat an elephant is one bite at a time.

If you have not begun planning...

  • Time isn't your ally at this point.
  • You will have to be more aggressive in your strategies.
  • Again, the most beneficial thing you can do is seek out company plans with matches.

Know your alternatives

• A thing to consider that most people don't plan for is long term care. This is a good option to explore because it is still cheap enough in your 50s to afford.

• Consider how social security will play into your financial plan. Make sure you maximize your social security benefit.

• Have you changed your investment risk to meet your risk tolerance? As you get older your investments cannot generally tolerate the same amount of risk. The sequence of returns in retirement can devastate your retirement plan.

Seek professional help and guidance

  • Saxon takes a holistic approach to planning.
    • Company sponsored plan approach
      • While Saxon does not benefit from any contributions to your company plan, they know that this is the best place for a client's money to be.
    • Saxon can help you stay on track and give sound investment advice

"The advisors at Saxon can help you create a plan for the future and offer suggestions on how to invest money," explained Garry. "Asking for help is one of the best things you can do – people are busy – and developing a plan and having a ‘coach’ to make sure you stick to the plan when things seem bleak will reward you over time”.

 

To download the full article click Here.

 

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The 10 Biggest 401(k) Plan Misconceptions

Do you know everything you need to know about your 401(k)? Check out this great article from Employee Benefit News about the top 10 misconceptions people have about their 401(k)s by Robert C. Lawton.

Unfortunately for plan sponsors, 401(k) plan participants have some big misconceptions about their retirement plan.

Having worked as a 401(k) plan consultant for more than 30 years with some of the most prestigious companies in the world — including Apple, AT&T, IBM, John Deere, Northern Trust, Northwestern Mutual — I’m always surprised by the simple but significant 401(k) plan misconceptions many plan participants have. Following are the most common and noteworthy —all of which employers need to help employees address.

1. I only need to contribute up to the maximum company match

Many participants believe that their company is sending them a message on how much they should contribute. As a result, they only contribute up to the maximum matched contribution percentage. In most plans, that works out to be only 6% in employee contributions. Many studies have indicated that participants need to average at least 15% in contributions each year. To dispel this misperception, and motivate participants to contribute something closer to what they should, plan sponsors should consider stretching their matching contribution.

2. It’s OK to take a participant loan

I have had many participants tell me, “If this were a bad thing why would the company let me do it?” Account leakage via defaulted loans is one of the reasons why some participants never save enough for retirement. In addition, taking a participant loan is a horribleinvestment strategy. Plan participants should first explore taking a home equity loan, where the interest is tax deductible. Plan sponsors should consider curtailing or eliminating their loan provisions.

3. Rolling a 401(k) account into an IRA is a good idea

There are many investment advisers working hard to convince participants this is a good thing to do. However, higher fees, lack of free investment advice, use of higher-cost investment options, lack of availability of stable value and guaranteed fund investment options and many other factors make this a bad idea for most participants.

4. My 401(k) account is a good way to save for college, a first home, etc.

When 401(k) plans were first rolled out to employees decades ago, human resources staff helped persuade skeptical employees to contribute by saying the plans could be used for saving for many different things. They shouldn’t be. It is a bad idea to use a 401(k) plan to save for an initial down payment on a home or to finance a home. Similarly, a 401(k) plan is not the best place to save for a child’s education — 529 plans work much better. Try to eliminate the language in your communication materials that promotes your 401(k) plan as a place to do anything other than save for retirement.

5. I should stop making 401(k) contributions when the stock market crashes

This is a more prevalent feeling among plan participants than you might think. I have had many participants say to me, “Bob, why should I invest my money in the stock market when it is going down. I'm just going to lose money!” These are the same individuals who will be rushing into the stock market at market tops. This logic is important to unravel with participants and something plan sponsors should emphasize in their employee education sessions.

6. Actively trading my 401(k) account will help me maximize my account balance

Trying to time the market, or following newsletters or a trader's advice, is rarely a winning strategy. Consistently adhering to an asset allocation strategy that is appropriate to a participant's age and ability to bear risk is the best approach for most plan participants.

7. Indexing is always superior to active management

Although index investing ensures a low-cost portfolio, it doesn't guarantee superior performance or proper diversification. Access to commodity, real estate and international funds is often sacrificed by many pure indexing strategies. A blend of active and passive investments often proves to be the best investment strategy for plan participants.

8. Target date funds are not good investments

Most experts who say that target date funds are not good investments are not comparing them to a participant's allocations prior to investing in target date funds. Target date funds offer proper age-based diversification. Many participants, before investing in target date funds, may have invested in only one fund or a few funds that were inappropriate risk-wise for their age.

9. Money market funds are good investments

These funds have been guaranteed money losers for a number of years because they have not kept pace with inflation. Unless a participant is five years or less away from retirement or has difficulty taking on even a small amount of risk, these funds are below-average investments. As a result of the new money market fund rules, plan sponsors should offer guaranteed or stable value investment options instead.

10. I can contribute less because I will make my investments will work harder

Many participants have said to me, “Bob, I don’t have to contribute as much as others because I am going to make my investments do more of the work.” Most participants feel that the majority of their final account balance will come from earnings in their 401(k) account. However, studies have shown that the major determinant of how much participants end up with at retirement is the amount of contributions they make, not the amount of earnings. This is another misconception that plan sponsors should work hard to unwind in their employee education sessions.

Make sure you address all of these misconceptions in your next employee education sessions.

See the original article Here.

Source:

Lawton R. (2017 April 4). The 10 biggest 401(k) plan misconceptions[Web blog post]. Retrieved from address https://www.benefitnews.com/opinion/the-10-biggest-401-k-plan-misperceptions?brief=00000152-14a5-d1cc-a5fa-7cff48fe0001

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5 Simple Steps Clients Can Take to Boost Workers' Financial Wellness

Are you trying to help your employees increase their financial well-being? Check out these 5 great tips from Employee Benefits Adviser on how to help increase your employees' investment into their financial wellness by Joe Desilva.

Now more than ever, employers offer a wide array of benefits to build engagement and culture within their walls. Healthy snack options adorning the kitchen? Check. Fitness stipends? Check. Competitive work-from-home policies? Check. These are all nice-to-have extras, but employees are increasingly concerned about a more fundamental concern: retirement planning. And it’s here where employers are not providing enough enticing options as they are with the other, flashier perks.

One of the biggest issues employees face as they plan for retirement is economic uncertainty. Only 21% of workers are very confident that they will have enough money for a comfortable retirement, according to the 2016 Employee Benefit Research Institute Retirement Confidence Survey. This should matter to employers because financial uncertainty can have a negative effect on work performance, according to a study by Lockton Retirement Services. The study found that one in five workers reported feeling extremely stressed, mostly because of their job or finances, and those reporting high stress were twice as likely to report poor health overall, leading to more sick days and decreased productivity.

Boosting financial wellness programs not only can help employees’ finances in the long term, it can possibly help employees manage stress and increase productivity in the short term. Employers seem to understand this. In fact, 92% of employer-respondents in a study commissioned by ADP titled Winning with Wellness confirmed interest in providing their workforce with information about retirement planning basics, and 84% said the same of retirement income planning.

Yet, even though many employers appreciate the value of these programs, 32% are not considering implementation. The appetite exists for retirement planning, but the prospects of starting a program appear to be daunting. The truth is, it can be easier than you think.

Here are five simple steps an employer can take to start helping employees find tools and information to help them better manage their finances and grow more confident in their financial futures.

  1. Teach employees critical planning skills. Experts suggest retirees will need 75%-90% of their working income to live comfortably in retirement. To help employees determine the optimal amount to meet their needs, consider providing them with tools that look at factors such as current annual pre-tax income, estimated Social Security benefit amount, current age and the age they would like to retire, and any retirement savings and project possible retirement savings outcomes. Helping them estimate savings needs and retirement investing now can pay off in the future.
  2. Offer access to automatic enrollment and auto-escalation features. No matter how well employees do with other investments, the 401(k)’s advantages of tax-deferred growth and a company match is likely unbeatable. By automatically enrolling employees in retirement plans with savings increases, you may be able to position your employees for a more confident financial future.
  3. Provide resources so employees can seek investment advice from a professional. Employees may want to seek advice on their investments so they will not bear the stress of retirement on their own. There are a lot of options available to employees, but they may not be familiar enough with those options to determine whether or not they’d benefit. Providing access to professional investment advice with respect to retirement accounts may help employees feel confident in their retirement decisions.
  4. Deliver tools and personalized materials that integrate with real data. Working with a service provider that integrates payroll and recordkeeping data can give a retirement plan the ability to deliver targeted personalized information that employees can use for planning purposes. By delivering relevant information, employees can get engaged and have a better sense of the progress of their retirement planning.
  5. Make self-learning tools available for honing financial skills anytime, anywhere. A financial wellness program can help employees face their financial decisions with confidence. Most programs offer a library of tools and resources that gives employees access to information about planning, saving, and providing for their home, family and retirement. With financial education, employees may make better financial choices and set realistic goals.

At a time when employee retention is crucial, it’s important to create a support system for employees as they plan their financial futures. With so many workers concerned about retirement security, employers have a clear opportunity to step in and help. Whether it’s enabling employees to save more for retirement or learn about budgeting, financial planning can potentially serve as another popular perk among that list of nice-to-haves.

See the original article Here.

Source:

Desilva J. (2017 March 16). 5 simple steps clients can take to boost workers' financial wellness[Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/opinion/5-simple-steps-clients-can-take-to-boost-workers-financial-wellness

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