15 Most Expensive States for Long-Term Care: 2017
Are you reaching retirement? Then, perhaps, you've already looked into the affordability of long-term care, and - well - it's not as affordable as you thought. If you're looking to get the most out of your retirement budget, then you may want to stray away from these 15 most expensive states for long-term care, as of 2017.
This article is brought to you by Think Advisor, and it was written by Marlene Y. Satter. You can read the full article here.
Genworth’s annual study on the cost of care nationwide, which includes home care, assisted living facilities, etc., is not reassuring
The price of long-term care insurance is high—for everyone involved. Not just the patient but also the caregivers pay in more than money to make sure that the person in need of care is given the best care they can manage.
In this year’s version of Genworth Financial’s annual study on the cost of care nationwide—not just in nursing homes, which are less and less on the forefront, but also care provided at home, adult day care and assisted living facilities—the news is not reassuring. Costs have risen steadily, with those for licensed homemakers—those who provide what the study calls “hands-on personal care” for patients still in their homes—rising the fastest, increasing 6.17% just since last year.
And of course since people would prefer to stay in their homes, that’s going to hit a lot of people hard.
Less-skilled “homemaker care,” such as cooking, cleaning and running errands (not included in the breakdown that follows) has risen pretty quickly as well, increasing by 4.75% since last year. But both versions of homemaker assistance are at the low end on the price scale, coming in at $21 for homemaker care and $22 for licensed homemaker care. The big bucks are elsewhere.
They may not have risen as quickly percentage-wise as the two already mentioned, but adult day care increased by 2.94% since last year to a national median rate of $70 per day. Assisted living facilities now average a median monthly rate of $3,750, an increase of 3.36% from last year, while nursing homes, at an increase of 5.50% for a private room, now run a median daily rate of $267. No matter how you look at it, that’s a lot of money.
And caregivers often sacrifice their own financial well-being to care for their family members, forking over an average of $10,000 out of their own pockets for expenses that range from household expenses, personal items, or transportation services to payment of informal caregivers or LTC facilities.
A whopping 62% are paying for these expenses out of their own retirement funds; 45% have seen those costs cut their basic quality of living; and 38% have cut the amount they devote to savings and retirement to meet the costs of care.
And another sad side effect of all this stress is that 27% say it’s had a negative impact on their relationship with the person they’re caring for.
The penalty for all this devotion is that absences, reduced hours and chronic tardiness can end up cutting a caregiver’s pay. About a half of caregivers estimate that they lost approximately a third of their income.
Check out the 15 most expensive states for LTC.
15. Maryland
Average Annual LTC Cost: $60,305
- Adult day care: $2,150
- Licensed home care: $52,281
- Assisted living: $49,800
- Nursing home (private room): $118,990
14. Rhode Island
Average Annual LTC Cost: $60,789
- Adult day care: $19,500
- Licensed home care: $57,772
- Assisted living: $61,860
- Nursing home (private room): $104,025
13. California
Average Annual LTC Cost: $61,239
- Adult day care: $20,020
- Licensed home care: $57,200
- Assisted living: $51,300
- Nursing home (private room): $116,435
12. Washington
Average Annual LTC Cost: $61,704
- Adult day care: $16,900
- Licensed home care: $60,632
- Assisted living: $55,920
- Nursing home (private room): $113,362
11. Vermont
Average Annual LTC Cost: $63,139
- Adult day care: $34,320
- Licensed home care: $57,200
- Assisted living: $49,527
- Nursing home (private room): $111,508
10. North Dakota
Average Annual LTC Cost: $64,010
- Adult day care: $25,480
- Licensed home care: $63,972
- Assisted living: $36,219
- Nursing home (private room): $130,367
9. Maine
Average Annual LTC Cost: $64,423
- Adult day care: $28,080
- Licensed home care: $53,768
- Assisted living: $58,680
- Nursing home (private room): $117,165
8. New York
Average Annual LTC Cost: $65,852
- Adult day care: $20,800
- Licensed home care: $54,340
- Assisted living: $47,850
- Nursing home (private room): $140,416
7. New Hampshire
Average Annual LTC Cost: $66,044
- Adult day care: $18,720
- Licensed home care: $60,357
- Assisted living: $58,260
- Nursing home (private room): $126,838
6. Delaware
Average Annual LTC Cost: $68,472
- Adult day care: $18,850
- Licensed home care: $50,908
- Assisted living: $72,180
- Nursing home (private room): $131,948
5. New Jersey
Average Annual LTC Cost: $68,833
- Adult day care: $23,400
- Licensed home care: $52,624
- Assisted living: $69,732
- Nursing home (private room): $129,575
4. Hawaii
Average Annual LTC Cost: $71,820
- Adult day care: $18,200
- Licensed home care: $59,488
- Assisted living: $51,000
- Nursing home (private room): $158,593
3. Connecticut
Average Annual LTC Cost: $72,671
- Adult day care: $20,800
- Licensed home care: $52,624
- Assisted living: $55,200
- Nursing home (private room): $162,060
2. Massachusetts
Average Annual LTC Cost: $73,307
- Adult day care: $16,900
- Licensed home care: $59,488
- Assisted living: $67,188
- Nursing home (private room): $149,650
1. Alaska
Average Annual LTC Cost: $117,800
- Adult day care: $43,709
- Licensed home care: $63,492
- Assisted living: $72,000
- Nursing home (private room): $292,000
You can read the full article here.
Source:
Satter M. (2 October 2017). "15 Most Expensive States for Long-Term Care: 2017" [Web Blog Post]. Retrieved from address https://www.thinkadvisor.com/2017/10/02/15-most-expensive-states-for-long-term-care-2017
Why The Financial Health Crisis Is An Employee Wellness Issue
Is your employees' financial situation affecting their well-being at the workplace? Take a look at this interesting article by Michelle Clark and find out why you should help your employees increase their financial well-being.
Every generation of worker is struggling with various financial stressors. It’s the top cause of lost productivity. As an HR leader, you want to help find ways to help alleviate the pressure.
Employers are starting to realize that providing their people with a fair and regular paycheck and 401(k) just isn’t good enough to ensure their financial health. And it is their problem.
We’re in the middle of a financial literacy crisis that’s affecting the financial health – and overall wellness – of every generation of worker. Too many just don’t know the ins and outs of managing their money and as a result are facing financial stress that is taking over their attention at home -- and now on the job.
As a result, we’re seeing a growing shift in the perspective of employee benefits – augmenting traditional wellness models with a strategy that’s more well-rounded and holistic, centered on the individual’s total personal health.
It’s a shift that’s good not just for employees. It’s good for the business. Many people just don’t have a lot of expendable income. Worrying about money is the top cause of lost productivity. And financial concerns push healthy behaviors like exercising and eating onto the back burner.
No generation is immune. Baby boomers are still trying to recover from the dent to their retirement savings caused by the Great Recession. Generation Xers are grappling with the emotional and financial toll of simultaneously caring for growing children and their aging parents. For Millennials, student debt is crushing.
And that retirement plan? Many employees borrow against it (not understanding the penalties) for routine expenses that they can’t cover from their paychecks.
Finding a fix starts with recognizing the financial health problem to begin with, and its impact on the employee and the workplace. Once you understand the specific pain points of your employees and the scope of their problems, a variety of tools are available to address them. Some may be employer-sponsored, while others may be offered up as low-cost voluntary benefits.
For example, employee purchasing programs help workers buy big ticket items through payroll deductions – avoiding credit card debt, hidden fees and interest charges. They are voluntary benefits that cost the employer nothing, and are administered through payroll deductions. Other services make low interest installment loans – better than the going rates in the open market – available when employees need to cover unexpected expenses. It helps them avoid predatory payday loans that can compound the financial press.
If your employees are like many, they are living paycheck to paycheck. Helping them out of this bind poses a win for everyone.
See the original article Here.
Source:
Clark M. (2017 August 10). Why the financial health crisis is an employee wellness issue [Web blog post]. Retrieved from address https://blog.shrm.org/blog/why-the-financial-health-crisis-is-an-employee-wellness-issue
Prospect for Tax Reform Remains Unclear as Mounting Priorities Compete for Attention
Has the news surrounding tax-reform left you worried about your employee benefits program? Check out this great article by Kathleen Coulombe from SHRM on what you should know about the potential over haul of our tax code and what it means for your employee benefits program.
As efforts to repeal and replace the Affordable Care Act continue to plod along in Congress, House and Senate tax writers have been working with the Trump administration to find a way forward on tax reform.
Hearings continue to take place, most recently last week with both the House Ways and Means Tax Policy Subcommittee and the Senate Finance Committee looking at a path forward on tax reform. One area Members of Congress are reviewing is the tax-favored status of employer-sponsored retirement and welfare benefits. The House Ways and Means Tax Policy Subcommittee hearing focused on individual reform, which frequently touched on retirement security. One of the key issues discussed during the hearing was shifting the way individuals plan and save for retirement from a traditional pre-tax 401(k) account to an after-tax Roth model (aka "Rothification"). While hearing panelists noted that moving individuals saving for retirement to an after-tax 401(k) model would generate additional tax revenue for the U.S. Government, it could also disrupt the current retirement system.
SHRM believes a comprehensive employer-sponsored benefits package is a key component that employers use to attract and retain top talent. Two of the most widely utilized benefits are employer-provided health care and retirement plans. SHRM believes tax incentives should be used to expend access to and participation in health care and retirement savings plans.
The SHRM-led Coalition to Protect Retirement has expressed concerns to congressional members about moving individual retirement to an after-tax approach, as we believe it will undermine savings for retirement.
While tax reform legislation is not expected to be released until the fall, a set of principles will be released prior to the House adjourning for its August recess.
In the absence of a comprehensive tax reform plan moving ahead, there remains the strong possibility that a bill aimed strictly at tax cuts could be an alternative and could move as soon as members return to Washington in early September.
Aside from charting the course on tax reform, members must also fund the government for FY2018 by September 30 and increase the debt ceiling limit. While the House Budget Committee approved a FY18 budget resolution along party lines that contained tax reconciliation instructions, to move forward the resolution will have to pass both chambers and be signed by the president.
The resolution also requires congressional committees in both the House and Senate to achieve specific deficit reduction levels for 2018-2027 and submit recommendations by October 6, 2017. Given the challenges the budget resolution is facing and the fact that the House and Senate have not passed any of the 12 appropriations bills necessary to fund the government, a short-term continuing resolution will need to be enacted by October 1 to keep the federal government open and it could include an increase in the debt ceiling.
See the original article Here.
Source:
Coulombe K. (2017 August 1). Prospect for tax reforms remains unclear as mounting priorities compete for attention [Web blog post]. Retrieved from address https://blog.shrm.org/blog/prospect-for-tax-reform-remains-unclear-as-mounting-priorities-compete-for
HSAs and 401(k)s are Becoming More Closely Linked
As HSAs continue to grow, more employers are starting to work HSAs into their retirement programs. Take a look at this great article by Brian M. Kalish from Employee Benefit News and see how employers are using HSAs as a tool to help their employee plan for their healthcare cost in retirement.
There has been progress among leading-edge advisers and employers to more closely link HSAs and 401(k)s in order to allow employees to use a health savings account to save for healthcare expenses post-retirement.
Eighty percent of Americans have a high concern about healthcare costs in retirement, according to Merrill Lynch, and healthcare is the largest threat to retirement savings and the most important part of a retirement income plan, according to Fidelity, which is why there has been a recent push to more closely link HSAs and 401(k)s, or health and wealth.
HSAs are triple tax-free, Brian Graff, CEO of the American Retirement Association, an Arlington, Va.-based trade group said at a recent event hosted by AFS 401(k) Retirement Services
The fact of linking health and wealth “is a big idea and there is some continued focus on it moving forward,” says Alex Assaley, managing principal of Bethesda, Md.-based financial services advisory company AFS 401(k).
“There is a lot more interest in HSAs by pretty much everybody,” explains Nevin Adams, chief of marketing and communications at the American Retirement Association.
According to the Employee Benefit Research Institute, nearly 30% of employers offered an HSA-eligible health plan in 2015 and that percentage is expected to increase in the future both as a health plan option and as the only health plan option. Most of the growth has been recent as more than four-in-five HSAs have been opened since the beginning on 2011, according to EBRI.
At an event hosted by Assaley’s firm in 2016, he said there was not a lot of traction around the idea of using HSAs to save for healthcare expenses post-retirement. But, now, there is a bigger push.
As HSAs continue to grow, employers, employees and advisers are “understanding there is an ability to accumulate money in the HSA and use that for healthcare or something [employees] want to set aside because they are not sure what their healthcare cost situation in the future is going to be,” Adams explains.
Assaley adds that there has “definitely been a good deal of refinement and evolution in the HSA marketplace [recently], whereby … you are now seeing more companies offering HSAs as a part of their medical and retirement strategy. You are also seeing more employees thinking about HSAs as part of their overall holistic fin wellness program.”
In one-on-one coaching sessions with employees, conversations are becoming more prominent, as advisers help employees, “understand how all employee benefits tie together to make wise financial decisions today, tomorrow and for their retirement,” Assaley says.
“With certainty, there has been a great deal of growth in the marketplace and evolution in how HSAs and 401(k)s are starting to interlock together,” he adds.
Saving for the future
Looking down the road, Assaley expects the linking to continue, especially if proposals to alter the maximum accounts that can be contributed pre-tax to an HSA is tweaked, as has been proposed by legislators on Capitol Hill. Some proposals shared amongst the industry, Assaley says, propose doubling the pre-tax amount.
“If that happens or there is any sort of meaningful increase, then I think you will see an exponential growth in the numbers of HSAs,” he says.
For advisers, the work is not done as they need to help employees better understand how a HSA works and from there help employees understand the benefits of a HSA and the different ways to structure one, Assaley explains.
“Even today, there is a large knowledge gap on what an HSA is, how it works and how someone can use one as part of health and retiree healthcare needs,” he says.
See the original article Here.
Source:
Kalish B. (2017 July 5). HSAs and 401(k)s are becoming more closely linked [Web blog post]. Retrieved from address https://www.benefitnews.com/news/hsas-and-401-k-s-are-becoming-more-closely-linked?feed=00000152-18a4-d58e-ad5a-99fc032b0000
10 Ways Millennials are Saving for the Future
Have your millennial employees started saving for their retirement? Check out this article by Marlene Y. Satter from Benefits Pro and see what millennial across the country are doing to prepare themselves for retirement.
They’re called spendthrifts by other generations, are laden with student debt and burdened with lower-paying jobs.
But that doesn’t mean that millennials aren’t thinking about the future and saving for it.
And they could certainly use a little help—from human resources and from plan sponsors—to be more successful at it, since both the debt and the jobs don’t leave them much to work with when all expenses are accounted for.
Both HR and sponsors might want to consider how retirement savings plans and their features—auto-enrollment, auto-escalation, employer matching funds—could be tweaked to give millennials a boost in meeting major life goals and in saving for retirement, as well as for the health expenses it undoubtedly will bring along with it.
In the meantime, they can consider how millennials are already trying to stretch every dollar till it snaps—some in very unconventional ways.
In a survey, digital banking app Varo Money, Inc. has uncovered a range of methods millennials are using to make those paychecks go farther.
And while retirement is certainly on their radar, that’s not the only goal they’re pursuing; of course they have a whole life to live first. Some of their prime goals are travel, buying property and dreaming about a new car, while
Here are some of the strategies to which millennials resort in the quest to fund their futures. Can plan sponsors be less imaginative than some of these? Surely not….
10. Half of millennials surveyed save automatically.
While respondents say they aren’t fond of spreadsheets—they don’t track their money constantly, or input figures into programs like Excel or Mint to create detailed, category-based budgets—they do watch their bank balances regularly and are pretty aware of what they spend monthly.
They view it as “hands-off” money management.
What they do, however, is save automatically out of each paycheck, with 50 percent socking away a percentage every payday. So they’re prime candidates for savings plans with auto features—enrollment, escalation, etc.
A report from the Society of Human Resource Management points to multiple studies indicating that auto escalation in particular—but to a high level such as 10 percent—results in higher savings for employees, since few actually opt out of a rate higher than they might have chosen for themselves.
9. Millennials are looking to climb the corporate ladder—to a higher paycheck.
An impressive 39 percent of millennials are on the prowl for a better-paying job opportunity, which is yet another reason that HR personnel and plan sponsors hoping to retain good staff might want to keep an eye on millennials’ rate of pay, as well as their rate of savings.
Reviewing other benefits wouldn’t hurt, either, since the more attractive an existing job is, the more likely an employee is to stay.
Considering the cost of finding, hiring and training replacements, a raise and better benefits might be cheaper in the long run.
8. Millennials know food is cheaper at home, especially with a partner to share it.
Millennials, despite their spendthrift reputation, are willing to skip little luxuries like the much-vaunted avocado toast or make coffee and meals at home.
In fact, 36 percent stick with the coffeepot on the counter instead of the barista at the corner, while 11 percent of men and 3 percent of women are willing to abandon the avocado toast—after all, everyone has his, or her, breaking point when economizing.
And 26 percent of respondents point out that cooking for two is cheaper than dining solo at home—much less in a restaurant.
7. Millennials recognize how much cheaper it is to live as a couple.
While 75 percent of millennials are conscious of the financial benefits in being half of a couple. 44 percent point to the cheaper rent when there are two to share the load.
And that helps them both save more.
Even those who aren’t part of a couple are looking for roommates, according to Mashable, which reports on a SmartAsset study finding that in high-rent cities like San Francisco, New York and Boston a person can save at least $700 a month by having a roommate.
Cue in the cooking-at-home technique for group meals, and the savings grow even more.
6. Millennials go on fewer dates to save money.
Being in a relationship, say 16 percent of millennials, is cheaper than still looking, since they save money by not going out on so many dates.
5. They save on taxes if they’re married.
Ever-practical, these millennials. They recognize that being half of a married couple can save on their tax bill—and they don’t forget that either when looking for cash to stash for the future.
4. They bargain-hunt for credit card perks.
Make no mistake, among millennials travel is a big deal: 58 percent said travel destinations are their favorite topic of conversation.
And asked what they would purchase with $2,000 if they could only spend it on one thing, 25 percent said plane tickets.
As a result, they tend to be particularly savvy when it comes to being able to travel, with 16 percent seeking out credit cards that provide big mileage bonuses.
3. They leverage perks to pursue other little luxuries without having to lay out cash for them.
In fact, they’re fond of doing it for travel, with 7 percent using airline miles to upgrade to business class.
In addition, 7 percent use status from premium credit cards for hotel upgrades, and 6 percent use premium cards for lounge access.
2. They’re planning on grad school.
While that may not seem like saving—even though it’s definitely ahead of the 11 percent of male millennials who are saving for a new luxury car and the 12 percent of female millennials saving for a new wardrobe—they’re looking toward an advanced degree for a leg up the job ladder.
Oh, and 27 percent are saving for a place of their own.
1. They stay away from credit cards.
Mashable reports that, despite their spendthrift reputations, millennials are actually opting for other types of technology—digital wallets, for instance—but not so much credit cards.
It cites a BankRate finding that in fact, 67 percent of millennials don't have credit cards—the lowest amount of people without credit cards in any demographic, among adults.
And they’d rather be paid in cash, thank you very much. So say 58 percent, and they’re smart; it wards off unnecessary purchases and helps keep them out of credit card debt.
See the original article Here.
Source:
Satter M. (2017 June 29). 10 ways millennials are saving for the future [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/06/29/10-ways-millennials-are-saving-for-the-future?ref=mostpopular&page_all=1
How to Build Financial Wellness into a More Holistic Wellness Program
Are you looking for new ways to help your employees increase their financial wellness? Check out this great article by Michelle Clark from SHRM highlighting what HR can do to help employees engage with the company's benefits program to improve their financial situation.
The majority of HR professionals give their employees a financial health rating of “fair” and nearly 20 percent report that their employees are “not at all” financially literate according to a national SHRM survey.
That’s an issue. Because when employees are stressed about money they don’t turn their worry off at work – and the price is paid in lost productivity.
You can help fix the problem. Everyone wins when traditional employee wellness programs are recast in a more holistic, well-rounded way – with financial wellness an important cornerstone.
There is no cookie cutter solution. But if you build a customized program that’s responsive to specific requirements and comfort levels of different employee groups, it can be rewarding and valuable.
First, review your employee demographics to get an idea of what their financial situations may look like. For example, it’s understood that the majority of today’s workforce is comprised of three age groups: Baby Boomers, Generation X and Millennials. Each has different financial stressors and preferences on how they prefer to receive assistance:
- Boomers on the verge of retirement are wondering if they can afford it or even want to retire. If they need to work, they are worried they’ll have a hard time finding a job.
- Generation X can barely think about retirement planning when they’re trying to cover the mortgage, raise kids, save money for college and shoulder responsibilities for aging parents.
- Millennials are burdened by student loan debt while trying to stretch their paychecks so they can live on their own instead of with their parents.
There also are vastly different ways each accesses support. Boomers may be okay with online resources and one-on-one coaching. But Millennials and Gen Xers may want more high-tech resources such as websites offering basic money courses and worksheets to help with budgets, housing or investment planning.
Once a solution has been established, the next step is getting people to partake. You don’t want to target employees, since privacy is a major consideration. Offering options allows employees to engage privately on their own terms. That’s why the online solutions are ideal for individual financial issues, offered in tandem with more on-site sessions on general concerns. And there’s always the potential of offering one-on-one financial counseling or financial wellness coaches to round out your program.
See the original article Here.
Source:
Clark M. (2017 June 16). How to build financial wellness into a more holistic wellness program [Web blog post]. Retrieved from address https://blog.shrm.org/blog/shrm-blog-june-2017-how-to-build-financial-wellness-into-a-more-holistic-we
What's Really Draining Employee 401(k) Accounts
Are your employees placing enough emphasis in their retirement? Here is a great article by Cynthia Loh from Employee Benefit Advisor on what employers can do to help their employees properly utilize their 401(k)s.
When it comes to debating the root cause of why Americans, as a whole, are short at least $6.8 trillion in retirement savings, it’s never long before someone points a finger at fees.
But while fees do their part to erode retirement nest eggs, there’s actually something far more detrimental to a comfortable retirement: the investing behavior of savers themselves. In fact, behavioral mistakes could cost savers 1.56% per year.
How does poor behavior add up to such a cost? Here are three core employee 401(k) missteps, and how plan sponsors can limit them.
1. Employees often make poor fund selections
Employees generally find it challenging to choose their own investments, and the task often ends up costing them.
For many employees, the initial obstacle of setting up a 401(k) plan stops them in their tracks. A large fund line-up can cause analysis paralysis, and actually reduce participation rates. One study found that for every additional 10 funds added to a set of plan options, participation drops by about 2%.
For those employees who do participate, they are left to fend for themselves with complex fund lineups. Ideally, they would establish an asset allocation with a correct level of risk and an optimal diversification for that risk tolerance. Unfortunately, a 2015 study by Financial Engines found that 61% of unadvised plan participants had inappropriate risk levels.
Finally, it’s not uncommon for employees to attempt investment selection without fully understanding proper diversification. Instead of balancing risk, participants might divide their money evenly between the options on an investment menu. For example, if six out of 10 options are stock funds, they are likely to end up at roughly 60% stocks. If 18 out of 20 options are stock funds, they will end up with 90% stocks.
So, what should you, the plan sponsor, do when your employees face a 401(k) situation that seems to inhibit participation, leads to unnecessary risk, and fails to encourage proper diversification?
Solution: Consider offering managed 401(k) accounts as a Qualified Default Investment Alternative
If employees find it challenging to make fund selections confidently, why not build in default investment advice to your plan? A Qualified Default Investment Alternative (QDIA) provides a standard, default offer of a portfolio customized to each employee. By constructing a diversified, optimized portfolio for each employee as a standard service, your 401(k) plan can help employees avoid uninformed decisions about their investments. The fund selection process will be more straightforward for new employees. As such, they may be less likely to opt for unduly high risk levels, and, by default, their investments will then be properly diversified.
In other words, rather than providing employees with a list of ingredients, provide them with a prepared meal customized to their palate and set up to satisfy their financial health.
2. 401(k) participants often “set it and forget it”
For those participants that successfully navigate participation, asset allocation, and fund selection, the ongoing maintenance of a 401(k) still presents challenges. Many plan participants choose their deferral rates and funds on the first day of work and might not change anything for the entire time they’re at that employer — or even after they leave. Meanwhile, they’re missing out on the benefits that could be had by rebalancing or switching investments based on macro trends, such as an ETF price decrease.
Plan sponsors should consider all the options available to them for helping employees understand the right asset allocation, appropriate fund allocations, ongoing portfolio maintenance — and the path forward to a secure, stable retirement.
Solution: Enable automation to help your employees maintain their 401(k)
401(k) maintenance is essential, but it shouldn’t fall on individual employees to disrupt their daily lives to keep things up-to-date. Technology can make the task of maintaining 401(k) investments far easier for employees.
If employees don’t want to actively revisit their deferral rates and asset allocations on an annual basis, automation can handle the process of portfolio rebalancing and tax optimization for the participant. While target-date funds (TDFs) have offered limited automatic adjustment for years, today, 401(k) plans built with automated advice tend to offer more personalized optimization for employees. For instance, TDFs usually rely on a generic set of assumptions about their investors to determine how they rebalance and adjust risk over time. Automated 401(k) plans can offer personalized rebalancing, tax optimization, and asset reallocation, solving for an individual’s specific characteristics and goals.
3. Poor investing behavior is a workplace issue
Employees talk to each other about their benefits, worry together from time to time, and often ask one another for advice. In short, water-cooler talk plays a role in how participants behave with regards to their 401(k).
In any given office, there’s at least one employee — we’ll call him Gary — who fancies himself a stock trading guru. Gary checks the morning headlines and stock tickers. He’s always offering unsolicited financial advice to his fellow colleagues. And he spends a lot of time at the water cooler.
For novice employees, having somebody like Gary in the office can either inspire them to gain financial literacy or drastically sway their investing behavior. As the plan’s fiduciary, the 401(k) plan sponsor should make sure the right financial advice reaches all employees, so that water-cooler talk from people like Gary doesn’t play too large a role in employees’ investing behavior.
Solution: Offer personalized financial advice in your 401(k) plan
A responsible way to give employees the information they need to make good decisions is to offer personalized financial advice with your 401(k) plan. Advice from a fiduciary adviser helps participants make decisions for their own individual situation, removing the confusion of what they hear at work, see on television, or learn from their peers.
That advice becomes more valuable when it takes into account personal goals such as buying a home and covers all assets, including 401(k) assets. Some 401(k) platforms have educational features built in that can anticipate when a participant has a question or appears confused and serves up tailored information that can help employees make a sound decision. Others make use of customer service centers that make it easy for employees to ask questions to experts when they need to, rather than front-loading them with information during an orientation.
Save your employees the cost of poor investing behavior
When it comes down to it, plan sponsors often underestimate just how confusing 401(k) plans can be for employees. Most employees know that saving for retirement is important, but few actually understand all they should do to maximize the benefit of their 401(k) contributions.
Help your employees save money by selecting a 401(k) solution that helps to minimize behavioral mistakes. Poor fund selection, lack of account maintenance, and bad advice shouldn’t detract from employees’ results. With elegant solutions like a managed account QDIA, investment automation, and expert advice, you can save your employees time, money and anxiety.
See the original article Here.
Source:
Loh C. (2017 June 13). What's really draining employee 401(k) accounts [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/opinion/whats-really-draining-employee-401-k-accounts
6 Actions Employers Can Take to Boost Retirement Savings
Preparing your employees for their retirement has become a major responsibility for employers. From education to offering the right program for your employees to start saving, employers now more than ever must be prepared for everything involved with retirement. Take a look at this great article from Benefits Pro on what you can do to prepare yourself and your employees for retirement by Marlene Y. Satter.
Lots of people point to self-indulgent millennials or debt-beleaguered GenXers or negligent boomers as the reason for the retirement crisis and the cause of their own hardships.
But a Morningstar study instead points the finger at employers, and their disinterest in working harder to improve retirement plans so that they elicit the best response from employees.
A blog post from the Center for Retirement Research at Boston College highlights the study and points out that employers could improve retirement outcomes for their workers—if they were sufficiently interested in doing so—based on research already in hand.
Employers who offer 401(k)s to their workers made some progress, mostly, along the path of automatic enrollment, the blog post notes, during the early 2000s, with notable success: “Today,” it says, “nearly 90 percent of automatically enrolled employees stay where they are put, while only about half of workers sign up to save when 401(k) enrollment is strictly voluntary.”
But progress along those lines has ground to a halt, it points out, and because of the huge variations among 401(k) plans there are plenty of cracks in the private system through which employees are all too ready to fall—and employers apparently too ready to let them.
The Morningstar report points out that even when companies do use auto-enrollment, plans aren’t designed well enough to encourage an adequate level of savings—or, in fact, actually discourage it.
The report, titled “Save More Today: Improving Retirement Savings Rates with Carrots, Sticks, and Nudges,” highlights a number of ways in which plan features actually work against employees saving enough to actually retire on—but the flip side of that is that those features can be tweaked so that they work for the employee’s benefit, and turned into those carrots, sticks and nudges.
And it doesn’t even have to be expensive, since many employers are concerned about the outlay for a retirement plan and are often reluctant, at best, to add to it.
Here are 6 ways employers can encourage their employees to save more for retirement—and at limited, or no, additional cost.
6. Auto-enrollment.
If a company’s plan doesn’t have automatic enrollment, it should, since the results are so outstanding.
Lots of people fail to sign up, if “voluntary” enrollment is required, due to procrastination, preoccupation or other human failings—but if it’s an automatic feature, they get swept up and are saving for retirement almost before they know it.
Says the report: “[P]articipation rates are significantly higher in plans with automatic enrollment (compared to voluntary enrollment schemes).” It adds, “[E]arly research by Madrian and Shea (2001) noted a 48-percentage-point increase in 401(k) participation among new employees after the adoption of automatic enrollment.”
That’s a small action to have such a large effect.
5. Automatic reenrollment.
The marked effect of auto-enrollment on participation has a corollary: existing eligible employees aren’t usually included when the feature is added to a plan.
And this is not unusual.
In fact, the study cites two others that find the inclusion of “reenrollment”—adding existing employees to a plan—is “relatively uncommon,” with the studies finding only 15 percent or 12 percent of plans offering that opportunity.
However, adding “reenrollment” when an auto-enrollment feature is added can significantly boost the participation of existing employees.
4. Higher default savings rate.
An aggressive default savings rate will get employees saving more from the very beginning—and although employers say that workers will be reluctant to accept a rate of anywhere from 6–8–10 percent rather than the more common 3 percent, that’s contrary to study findings.
In fact, says the study, “Roughly half of investors tend to accept the initial default savings rate regardless of level, up to 6 percent using empirical data and up to 12 percent based on the online survey.”
And that’s not all: it adds that “Participants who reject the default rate tend to select higher savings rates, on average, as default rates rise,” which means they are saving even more.
This can be particularly important since, the report says, many employers are more concerned with the participation rate than the savings rate—but the savings rate is what will save employees come retirement.
3. Mandatory auto-escalation.
Automatic escalation, the study reports, “is commonly offered in conjunction with automatic enrollment (e.g., 62 percent of plans offering automatic enrollment also offered automatic escalation according to Aon.”
But only a third to a half of plans actually offer it, despite its benefits—and 62 percent of those who do provide it on an opt-in, rather than an opt-out, basis.
That design is poor on two counts: not only does it not “sweep” everyone into an automatic increase in savings, people who have to opt in don’t always keep doing so.
Just 11 percent, the report says, stay in the plan when it is opt-in, compared with 68 percent who do so when it is opt-out.”
And then there’s the issue of whether the auto-escalation rate is set high enough. Since workers will often accept whatever the default is, setting the rate higher rather than lower would push them to save more and better prepare them for retirement.
2. Matching contributions.
Matching contributions are a thorny issue, since driving up the participation rate will require more in contributions.
As a result, employers might not only be reluctant to boost the participation rate too much, they’re not all that anxious to increase their matching contributions either.
But again, a tweak can change employee behavior without a large increase in cost.
One option is to stretch the match out further; for instance, matching 25 percent of the first 8 percent of employee deferrals instead of matching 50 percent of the first 4 percent employee deferrals. Another option is moving to a discretionary match approach.
1. In-plan advice.
Plans that provide employees with advice can also have a marked effect on savings behavior, with higher recommended savings levels from in-plan financial advisors.
In fact, 90 percent of participants who engaged an in-plan advice solution increasing their savings rates—by about 2 percentage points on average.
“Additionally,” the report says, “higher savings recommendations result in higher implemented savings levels (i.e., more is better).”
This is one area in which it’s not clear whether opting in or having to opt out is more effective.
Perhaps it’s that those who are willing to save more seek out guidance on how much to save.
See the original article Here.
Source:
Satter M. (2017 May 15). 6 actions employers can take to boost retirement savings [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/05/15/6-actions-employers-can-take-to-boost-retirement-s?ref=hp-top-stories&page_all=1
10 Things Your Employees Should Know About Social Security
Do you need help educating your employees on the importance of social security? Here is an interesting article form SHRM about the 10 things your employees should know about their social security by Irene Saccoccio.
Social Security is with you throughout life’s journey. Yet, most people don’t know about Social Security’s 80-plus-year legacy or all we have to offer. National Social Security Month is the perfect time to talk to your employees about some of the ways we help secure today and tomorrow.
1. Social Security provides an inflation-protected benefit that lasts a lifetime. Social Security benefits are based on how long your employees have worked, how much they’ve earned, and when they start receiving benefits.
2. Social Security touches the lives of nearly all Americans, often during times of personal hardship, transition, and uncertainty. It is important your employees understand the benefits we offer.
3. We are more than just retirement. Social Security provides financial security to many children and adults before retirement, including the chronically ill, children of deceased parents, and wounded warriors.
4. We put your employees in control by offering convenient services that fit their needs. For example, a personal my Social Security account is the fastest, most secure way for your employees to do business with us. They can verify their earnings, check their Social Security Statement, get a benefit verification letter, and more. They should open a my Social Security account today.
5. Your employees can estimate their future retirement or disability benefits by using our Retirement Estimator. It gives estimates based on their actual earnings record, which can be invaluable as they plan for their future.
6. Your employees can apply for benefits online by completing an application for retirement, spouses, Medicare, or disability benefits from the comfort of their home or preferred secure location.
7. We offer veterans expedited disability claims processing. Benefits available through Social Security are different than those from the Department of Veterans Affairs and require a separate application.
8. Medicare beneficiaries with low resources and income can qualify for Extra Help with their Medicare prescription drug plan costs. The Extra Help is estimated to be worth about $4,000 per year.
9. Social Security is committed to making our information, programs, benefits, services, and facilities accessible to everyone. We will provide your employees, free of charge, with a reasonable accommodation to participate in, and enjoy the benefits of, Social Security programs and activities.
10.Social Security is committed to protecting your employees’ identity and information and safeguarding their personally identifiable information. Our online services feature a robust verification and authentication process, and they remain safe and secure.
Invite your employees to visit www.socialsecurity.gov today and learn how we help secure today and tomorrow.
See the original article Here.
Source:
Saccoccio I. (2017 April 19). 10 things your employees should know about social security [Web blog post]. Retrieved from address https://blog.shrm.org/blog/10-things-your-employees-should-know-about-social-security
Advisers Seek Innovative Ways To Increase Retirement Savings
Are you struggling to save for your retirement? Check out this great article from Employee Benefits Adviser on what employee benefits advisers are doing to help their clients prepare for their retirement by Cort Olsen.
In a recent forum co-hosted by Retirement Clearinghouse, EBRI, Wiser and the Financial Services Roundtable, experts shared how automated retirement portability programs could be the key to increased participation in private-sector retirement plans.
Today, at least 64% of Americans say they do not have sufficient funds for retirement and less than half of private-sector workers participate in workplace retirement programs. Former U.S. Sen. Kent Conrad, a Democrat from North Dakota, says these statistics could improve through better access to workplace retirement savings plans.
“So many small businesses tell [Congress], ‘Look we’d like to offer a plan, but we just can’t afford it,’” Conrad says. “We take the liability off of their shoulders, we take the administrative difficulty off their shoulders and allow a third party to administer the plans, run the plans and have the financial responsibility for the plans, which makes a big difference for employers.”
With these improved access points to savings plans, Conrad says the opportunity arises to create new retirement security plans for smaller businesses with fewer than 500 employees, enabling multiple employers — even from different industries — to band together to offer their workers low cost, well-designed options.
“Once the [savings plan] has been put in place for a period of time, we then introduce a nationwide minimum coverage standard for businesses with more than 50 employees,” Conrad says. “Any mandate is controversial, but legally if you dramatically simplify (don’t require employer match) really all they have to do is payroll deduction, and then it becomes not unreasonable for employers with 50 or more workers to offer some kind of plan.”
How to achieve auto-portability
Once plans have been made available for employers of all sizes, Jack VanDerhei, research director for the Employee Benefit Research Institute, recommends three different scenarios for auto-portability of retirement plans between employers.
1) Full auto-portability. VanDerhei considers this to be the most efficient scenario, where every participant consolidates their savings in their new employer plan every time they change jobs. The goal would be that all participants arrive at age 65 with only one account accumulated over the span of their working life.
2) Partial auto-portability. In this scenario, every participant with less than $5,000 — indexed for inflation — consolidates their savings in their new employer plan every time they change jobs. “If you have $5,000 or less in your account balance at the time you change jobs, leakage would only come from hardship withdrawals,” VanDerhei says. This means that money would only leave the account if the participant determined it necessary to take money out to pay for a necessity.
3) Baseline: status quo. In addition to hardship withdrawals, there is a participant-specific probability of cashing out and loan default leakage at the time of job transition. These participant specific leakages can be age, income, account balance and how long the participant has been with the employer.
VanDerhei says the younger the participants are to begin using full auto-portability of retirement plans, the more likely they are to get the most out of their retirement savings once they reach the age of 65.
“If you look at people who are currently between the ages of 25 and 34, under a partial portability there is a chance for accumulation to reach $659 billion and under a full portability there is a chance to reach $847 billion in accumulation,” VanDerhei says. “As you would expect, accumulation will decrease as the age increases if they choose to enter into auto-portability later in life.”
Spencer Williams, president and CEO of Retirement Clearinghouse, LLC, says although retirement portability has been codified into ERISA there are not enough mechanisms involved to encourage participants to continue to save for retirement rather than cashing out.
“We have a little more than a third of the population cashing out when they change jobs,” Williams says. “The research shows that if you fix that problem, the difficulty moving peoples’ money, we will begin the process of reducing leakage.”
Once a retirement account reaches a certain amount, Williams adds that participants will begin to take the account more seriously and have more desire to continue investing in the plan.
“We need to create an efficient and effective means by which people can have their money moved for them, and in doing that we begin to change peoples’ behavior,” Williams says. “Finally, if we increase access and coverage, along with auto-portability, all of those benefits accrue from all those new participants in the system.”
See the original article Here.
Source:
Olsen C. (2017 April 6). Advisers seek innovative ways to increase retirement savings [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/news/advisers-seek-innovative-ways-to-increase-retirement-savings