The Risk of Being Uninsured (and the Hidden Bargain in Addressing It Now)
Are you aware of all the risks associated with being uninsured? Take a look at this great column by Erica Oh Nataren from Life Happens and find out how you are putting yourself in harm's way by being uninsured.
With all the expenses of everyday living, it’s tempting to think of insurance as just another cost. What’s harder to see is the potential cost of not buying insurance—or what’s known as “self-insuring”—and the hidden bargain of coverage.
The Important vs. the Urgent
We’ve all experienced it: the tendency to stay focused on putting out fires, while never getting ahead on the things that really matter in the long run. For most people, there are two big things that matter in the long run: their families and their ability to retire. And being properly insured is important to both those concerns.
Life Insurance: a Hidden Bargain?
It’s exceedingly rare, but we all know it can happen: someone’s unexpected death. Life insurance can prevent financial catastrophe for the loved ones left behind, if they depend on you for income or primary care—or both.
The irony is that many people pass on coverage due to perceived cost, when in fact it’s far less expensive that most people think. The 2016 Insurance Barometer Study, by Life Happens and LIMRA showed that 8 in 10 people overestimate the cost of life insurance. For instance, a healthy, 30-year-old man can purchase a 20-year, $250,000 term life insurance policy for $160 a year—about $13 a month.
Enjoy the Benefits of Life Insurance—While You’re Alive
If budget pressures aren’t an issue, consider the living benefits of permanent life insurance—that’s right, benefits you can use during your own lifetime.
Permanent life insurance policies typically have a higher premium than term life insurance policies in the early years. But unlike term insurance, it provides lifelong protection and the ability to accumulate cash value on a tax-deferred basis.
Cash values can be used in the future for any purpose you wish. If you like, you can borrow cash value for a down payment on a home, to help pay for your children’s education or to provide income for your retirement.
When you borrow money from a permanent insurance policy, you’re using the policy’s cash value as collateral and the borrowing rates tend to be relatively low. And unlike loans from most financial institutions, the loan is not dependent on credit checks or other restrictions. You ultimately must repay any loan with interest or your beneficiaries will receive a reduced death benefit and cash-surrender value.
In this way, life insurance can serve as a powerful financial cushion for you and your family throughout your life, in addition to protecting your family from day one.
Disability Insurance: For the Biggest Risk of All
The most overlooked of the major types of insurance coverage is the one that actually covers a far more common risk—the risk of becoming ill or injured and being unable to work and earn your paycheck.
How common is it? While no one knows the exact numbers, it’s estimated that 30% of American workers will become disabled for 90 days or more during their working years. The sad reality is that most American workers also cannot afford such an event. In fact, illness and injury are the top reasons for foreclosures and bankruptcies in the U.S. today. Disability insurance ensures that if you are unable to work because of illness or injury, you will continue to receive an income and make ends meet until you’re able to return to work.
It’s tempting to cross your fingers and hope misfortune skips over you. But when you look at the facts, it’s easy to see: getting proper coverage against life’s risks is not just important, but a bargain in disguise.
See the original article Here.
Source:
Nataren E. (2017 May 11). The risk of being uninsured (and the hidden bargain in addressing it now) [Web blog post]. Retrieved from address https://www.lifehappens.org/blog/the-risk-of-being-uninsured-and-the-hidden-bargain-in-addressing-it-now/
7 Social Security facts Americans need to know
There are millions of Americans who depend on Social Security to fund their retirement. Many of the people who depend on social security for their retirement funding tend to overestimate how much money they will receive, or how long the money will last. With the many changes that have occurred to Social Security over the years many Americans are out of touch with how the program works and how it fits into their overall retirement strategy. Here is a great list compiled by Marlene Y. Satter from Benefits Pro on the top 7 things Americans need to know about Social Security and how it can impact their retirement.
7. Monthly benefits are based on the age at which you collect and the average of your highest 35 years of earnings.
How many years have you paid into Social Security?
The SSA will take your 35 highest paid of those years and average them to come up with what your monthly benefit will be.
Then, depending on whether you decide to go for early retirement (age 62), full retirement age (currently age 66, but rising to 67) or keep working till age 70, that will determine your benefit.
If you retire at age 62, your benefit will be reduced. At the full retirement age you’ll get your full benefit, but if you work till 70 the benefit will keep increasing.
The longer you work and don’t claim, the higher your benefit will be, but it stops growing once you hit age 70.
6. Claiming too early can cut your benefits for life.
If you decide to collect Social Security when you’re 62 (or, for that matter, any time before you hit age 70), your benefit will be paid at the minimum level you earned through your career and won’t rise (except for cost-of-living raises) at all.
If, on the other hand, you can wait till age 66, you’ll get at least a third more in those monthly checks than you would at 62.
But if you wait till age 70, your benefit will be at least 75 percent higher. That’s according to the Social Security Claiming Guide from the Center for Retirement Research at Boston College.
Oh, and the same goes for your spouse. If you claim early and die, your spouse will be restricted to that smaller benefit for life as well—unless said spouse has a separate career and benefits to draw on.
5. Widows and widowers can claim on their deceased spouses’ records to delay claiming on their own.
A widow or widower can claim a survivor benefit on their late spouse’s record in order to postpone claiming their own benefit—which can be very helpful should they want to delay claiming till age 70.
And, as the Claiming Guide points out, since most survivors are women and women’s benefits are generally lower—thanks to a range of reasons, including less time in the workplace and lower salaries—a husband’s benefit will generally be higher.
If, however, a woman’s benefit would be higher than her late husband’s, claiming on his record would allow her to delay claiming until age 70 to maximize her own benefit.
That said, survivor benefits are available as early as age 60, or age 50 if disabled, but they’re reduced up to 28.5 percent if claimed before the recipient’s full retirement age.
Survivor benefits can also be claimed by a divorced spouse as long as the marriage lasted at least 10 years.
4. Husbands can boost wives’ survivor benefits by delaying claiming.
Since most women survive their husbands—by an average of 6 years, in fact—a husband who wants to maximize his wife’s survivor benefit in the event of his death can delay claiming his own benefit as mentioned earlier.
In fact, a husband can increase the monthly benefit his wife gets as his survivor by more than 20 percent if he delays claiming Social Security until age 66 instead of doing so at age 62, if he waits till age 70 to claim benefits, that rises to 60 percent.
3. Continuing to work after claiming before full retirement age will cost you.
It might seem like a terrific idea to claim Social Security early and just keep working; after all, what’s not to like?
You gain another source of income, you’re still making money and maybe you envision just socking the extra money into savings for later in retirement.
But there’s one (not-so-)little flaw with that idea: Social Security may giveth, but it will also taketh away.
If you did that last year and weren’t already at the full retirement age, you’ve already learned to your sorrow that for every $2 above $15,720 you earned in calendar year 2016, Social Security withheld $1.
And Social Security will do that every year till you hit full retirement age; in that year, it will keep $1 for every $3 you earn above $3,490 each month.
If you wait to pursue that strategy till the year after you’ve hit full retirement age, however, it won’t withhold anything.
The good news is that you don’t actually lose that money; it’s restored to increase your monthly benefits later.
2. Social Security provides half the income for 61% of seniors.
It’s all very well to say that seniors will have Social Security to depend on, but the majority of seniors have few other resources to draw on.
A report on Madison.com highlights how essential Social Security is to the majority of seniors, regardless of how long they’ve worked or how much they’ve saved, with some statistics from Social Security itself—and one of those is just how important Social Security is to people’s financial well-being during retirement.
Whether they’ve managed to save more in 401(k)s, IRAs or even an actual pension plan, seniors are still deriving much of their income from those monthly Social Security checks.
1. Social Security provides at least 90% of income for 43% of unmarried seniors.
Lest you think that Social Security is just one leg of the proverbial three-legged stool, keep in mind the statistic above.
Without additional sources of income, unmarried seniors who are almost, or completely, dependent on Social Security checks will almost certainly not have a pleasant retirement—or a healthy one.
See the original article Here.
Source:
Satter M. (2017 August 29). 7 social security facts americans need to know [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/08/29/7-social-security-facts-americans-need-to-know?ref=mostpopular&page_all=1
4 Reasons Employers Should Offer Supplemental Life Insurance
Is life insurance included in your employee benefits program? For many employees, their only form of life insurance they have is the basic group life plan provided by an employer. This standard version of life insurance is usually not enough to maintain most employees financial wellness. Supplemental life insurance plans can enhance the standard coverage provided by most employers by providing employee financial security for their futures. While these plans can be a great way to boost an employees financial wellness only about one-half of employers across the nation offer supplemental life insurance with their employee benefits. Take a look at this great list put together by Mike Wozny from Think Advisor and find out the top 4 reasons why you should be offering your employees supplemental life insurance.
Depending on an individual family’s needs, supplemental life insurance can build on the employer-provided life insurance benefit, and helps employers give their employees the future financial security their employees need. For those employers who are not currently offering supplemental life, here are four key reasons they should start:
- Many employers can offer employees the financial security of supplemental life insurance without increasing their benefits budget. Because supplemental life insurance is opt-in and chosen by individual employees as appropriate for their situations, employers can offer supplemental life insurance as an option at no additional cost to the employer. Employees can then customize their coverage to their needs depending on their financial responsibilities.
- Many group carriers offer employers help in enrolling employees in supplemental life. Employers can host on-site enrollment sessions lead by a life insurance expert or hold a webinar led by the carrier followed by online enrollment. Many carriers even offer customized enrollment materials for each employee — all without adding to the employer’s human resources teams’ workload.
- Financial security is tied to employees' productivity. The Consumer Financial Protection Bureau has found that when employees have to spend time and energy worrying about providing for their families, they are more productive. Appropriate life insurance is a key factor in overall financial health, and provides employees with the peace of mind that lets them focus their energy elsewhere.
- Comprehensive benefits packages contribute to higher employee satisfaction and retention.The Society for Human Resource Management has also found that benefits offerings are important to employees’ decisions about what companies to work for and how long to stay. Offering a benefits package that includes supplemental life insurance coverage allows employees to customize benefits to their own needs.
With the loss of a loved one, many families also lose their income, which can be not only emotionally devastating, but financially devastating as well. When employers offer a complete benefits package, including one that promotes financial wellness, it gives their employees peace of mind, and helps attract and retain top workers.
Though life insurance is rarely a topic that families want to think about, employers can help employees obtain the right amount of insurance to protect their finances by offering supplemental life insurance options. For those employers who are not currently offering these benefits, in many cases they can be added at no expense, with little additional time required to administer them, and at great potential benefit to both the company and its employees.
See the original article Here.
Source:
Wozny M. (2016 October 19). 4 reasons employers should offer supplemental life insurance [Web blog post]. Retrieved from address https://www.thinkadvisor.com/2016/10/19/4-reasons-employers-should-offer-supplemental-life
5 Things Millennials Need to Know About Life Insurance
As millennials grow older and start planning for their futures, one thing they will have to think about is life insurance. While access to the internet and mobile data has made learning about life insurance easier than before many millennials still have many unanswered questions when it comes to planning for their life insurance policy. Take a look at his great column by Helen Mosher from Life Happens and find out the top 5 thing Millennials need to know about life insurance.
1. Life insurance is a form of protection. If you Google “life insurance” you’ll get a slew of ads telling you how cheap life insurance can be, without nearly enough information about what you need it for. That’s probably because it’s not terribly pleasant to think about: this idea that we could die and someone we care about might suffer financially as a result. Life insurance provides a financial buffer for the people you care about in the event something happens to you. Think just because you’re single, nobody would be left in the lurch? Read the next point.
2. College debt may not go away. Did someone—like your parents—co-sign your student loans through the bank? If so, the bank won’t discharge that debt upon your death the way that the federal government would with federal student loans. That means your parents, or others who signed the paperwork, would be responsible for paying the full balance—sometimes immediately. Don’t saddle them with the bill!
3. If you don’t know anything about life insurance, it’s probably better if you don’t buy it off the internet. It’s what we’re used to: You find the thing you need or love on Amazon or Ebay or Etsy, click a few buttons, and POOF. It arrives at your door. But life insurance is a financial planning product, and while it can be as simple as a 20-year term policy for less than a cup of coffee each day (for real!), going through your options with an insurance professional can ensure that you get the right amount for the right amount of time and at a price that fits into your budget. And many people don’t know that an agent will sit down and help you out at no cost.
4. Social fundraising only goes so far. This relatively recent phenomenon has everyone thinking that they’ll just turn to GoFundMe if things go awry in their lives. But does any grieving person want to spend time administering a social fundraising site? The chances of going viral are markedly slim, and social fundraising sites will take their cut, as will the IRS. And there is absolutely no guarantee about how much—if any—money will be raised.
5. The best time is now. You’ll definitely never be younger than you are today, and for most of us, the younger we are the healthier we are. Those are two of the most important factors for getting affordable life insurance coverage. So don’t delay. And if you don’t have an agent, you can also use our Agent Locator. The key is taking that first step.
See the original article Here.
Source:
Mosher H. (2017 July 5). 5 things Millennials need to know about life insurance [Web blog post]. Retrieved from address https://www.lifehappens.org/blog/5-things-millennials-need-to-know-about-life-insurance/
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
Employers Failing Workers on Flexible Retirement
Are you doing enough to support your older workers who are preparing for their retirement? Check out this great column by Marlene Y. Satter from Benefits Pro on how employers are hurting their employees by not offering a flexible retirement plan.
They may think they’re supportive of their older employees, but employers are actually failing them by not supporting flexible retirement— and by not supporting workers’ ability to retire.
So says All About Retirement, An Employer Survey,a study from the Transamerica Center for Retirement Studies, which finds that 69 percent of employers believe most of their employees could work to age 65 and not save enough to meet their retirement needs. In addition, 72 percent of employers believe that many of their employees expect to work past age 65 or do not plan to retire.
Employees, for their part, stay in the workplace thanks to their main motivations: income and benefits. To a lesser extent, some stay because they enjoy what they do. But even so, the report says, “many of today’s workers also envision a flexible transition into retirement, for example, by reducing hours or working in a different capacity.” But in many workplaces, that’s not happening.
Just 27 percent of employers, for instance, encourage workers to participate in succession planning, training and mentoring as they approach retirement.
Not exactly good news. Nor are these responses from the more than 1,800 for-profit employers with five or more employees: Only 39 percent of employers offer pre-retirees flexible schedules, while even fewer enable them to shift from full time to part time (31 percent) or take on positions that are less stressful or demanding (27 percent). They also don’t support employees’ desire to downshift, despite recognizing their desire to do so.
Yet 71 percent consider themselves to be “aging-friendly” by offering opportunities, work arrangements, and training and tools needed for employees of all ages to be successful.
There’s a disconnect between intent and what actually happens to their employees. A substantial 27 percent of employers cited one or more employment-related reasons as common causes for employees recent retirement that have nothing to do with an employee’s willingness or readiness to retire. Those include organizational changes (15 percent), layoff or termination (12 percent), and/or taking a retirement buyout/incentive (11 percent).
Then there’s ageism. While the vast majority of employers cite positive perceptions of older workers, not all are so positive. In fact, 59 percent of employers cited negative perceptions of employees 50 years old and older, including higher health care costs (35 percent), higher wages and salaries (29 percent), and higher disability costs (15 percent).
All isn’t rosy when it comes to retirement benefits, either. Despite knowing that workers are having a hard time saving enough to retire, among employers who currently offer retirement benefits, many don’t extend eligibility to part-time employees and many aren’t using automated plan features, such as automatic enrollment and the Roth 401(k) option. Also, despite plan sponsors’ emphasis on helping their employees’ save for retirement, “strikingly few” offer assistance to pre-retirees on managing their savings when getting ready to retire.
The report says, “Employers know that employees place importance on nonretirement employee benefits that could help improve or protect their financial security (e.g., health insurance, disability insurance, life insurance, employee assistance programs, workplace wellness and financial wellness programs, long-term care insurance and others). However, the survey finds the level of perceived importance exceeds employers’ actual offering of such benefits.”
See the original article Here.
Source:
Satter M. (2017 August 6). Employers failing workers on flexible retirement [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/08/07/employers-failing-workers-on-flexible-retirement?ref=hp-news
Reduce Employee Financial Stress
Are your employees struggling to reach their financial goals? Here is a great article by Heather Garbers from SHRM on what employers can do to help their employees reduce their financial stress and reach their monetary goals.
More American workers are living paycheck to paycheck than ever before, just making ends meet. Nearly three-fourths have less than $1,000 saved; and 34 percent have nothing in savings. Student loan debt totals over $1.3 trillion among some 44.2 million borrowers in the U.S. Unexpected expenses are not budgeted for and people are placing themselves at great financial risk.
As HR practitioners, we need to recognize that people are struggling financially – and that it is taking a toll not only on them personally, but also in the workplace. There are innovative benefit options and strategies that can help relieve financial stress on employees:
Student loan assistance. Today’s Millennials are challenged to get their lives going despite the crushing burden of student loan debt, and trust their employers for advice on how to manage it. Doing so can make you stand out in attracting the best talent and help win loyalty. Programs are available that not only assist Employees in refinancing and managing their debt, but also allow you to make contributions to loan balances, and assist Employees in setting up a 529 savings plan.
Employee Purchasing Programs (EPP). When people are experiencing financial stress and are confronted with unexpected expenses, they may take on high interest credit card debt or a payday loan. Employee purchasing programs are a great way for them to avoid amassing high interest rate charges when purchasing consumer goods.
Low Interest Installment Loans and Credit. A major danger for financially stretched employees is the ease with which they can get payday loans or cash advances on their credit cards without fully understanding the risk. The exorbitant interest rates only worsen the vicious cycle of debt. There are services, however, that underwrite low-interest rate installment loans well below the going rates and allow Employees to make payments through payroll deduction. Employers can sponsor the service at no cost as a voluntary benefit, and Employees can use the funds however they need to – whether it is paying a medical bill or purchasing a new air conditioner.
Financial planning and wellness services. Whether offered as one-on-one, personal coaching or online resources with interactive money management tools, everyone appreciates when employers offer resources to help them understand how to repair or build their credit and better manage their money. By offering these services, you have the opportunity to occupy a position of trust and cement long-term employee loyalty.
See the original article Here.
Source:
Garbers H. (2017 July 17). Reduce employee financial stress [Web blog post]. Retrieved from address https://blog.shrm.org/blog/reduce-employee-financial-stress
3 Key Points for Choosing a Wellness Provider
Are you in the process of searching for a new wellness provider? Take a look at this article by Rick Kent from Employee Benefit Adviser and check out these 3 great tips on what you should be looking for when searching for your next wellness provider.
Saddled with low savings rates and high household indebtedness, many American workers are relying on company-sponsored retirement plans like 401(k) programs as their last great hope for retiring with dignity someday. Unfortunately, rapidly escalating costs and tougher regulatory obligations have made supporting such plans among employers and third-party benefits consultancies a far more complex task than ever before.
Naturally, these events have raised the importance of offering robust financial wellness programs that complement company-sponsored retirement plans. Employees need offerings that provide valuable educational resources, personal finance coaching and relevant benchmarking data to plan participants and plan sponsors.
But how can employee benefits consultancies, already frequently strapped for time, deliver such tools and resources to their clients? Do they need to build this on their own, or should hiring an in-house expert or acquire a smaller provider?
The good news is “neither.”
Over the past few years, a number of dedicated financial wellness service providers for company retirement plans has emerged and are able to serve true third party, turnkey offerings that can be integrated with the offerings of employee benefit consultancies. In many instances, these services can be "white labeled" under the consultancies' own brands.
But caveat emptor: As with capturing any potential growth opportunity with an outsourced provider, it’s important to team up with the right partner.
With that in mind, here are the three key considerations to bear in mind for benefits consultants who are seeking the right third party, turnkey financial wellness provider to partner with and drive greater value for clients.
Look for educational and training materials that are robust and tailor-made to the plan participants. Any reasonably good financial wellness provider should be able to offer educational and training materials that cover a wide range of topics, including basic financial and investing concepts, tips for paying down debt and general keys to improving retirement preparedness. Frankly, that’s easy enough to accomplish, and required nothing more than bit of time and some money.
But what separates great financial wellness solutions from those that are merely good is both the willingness and capability to customize that content to the size of the plan and unique needs, goals and aspirations of the participants. An educated plan participant, one who is armed with information that is tailor-made for them, is far more likely to take the steps necessary to improve their financial wellness.
Demand data analytics programs that can demonstrate ongoing financial health and retirement readiness. It’s one thing for plan participants to have the knowledge they need to understand better what takes to one day retire comfortably. It’s an entirely different thing, however, knowing whether they are actually on track to do that.
That’s why it’s critical for a financial wellness provider to have data analytics programs in place that monitor key metrics and can determine, in real time, whether someone is making the behavioral changes necessary to become financially healthy and retirement ready. Importantly, providers should also be able to aggregate this data for plan sponsors, since that would provide important clues about the overall effectiveness of the plan.
Provide access to financial wellness resources without disrupting or tearing down current technologies. Nearly every benefit company has their own technology portals that allow plan participants to adjust their contribution amount or swap investments, as well as to view balances, statements and other critical information about their account. Obviously, not many companies will want to rebuild or make significant changes to their technology infrastructure to add financial wellness resources.
Therefore, look for providers that can integrate their own turnkey solutions into existing platforms with little, if any, disruption. This includes giving benefit companies the option of white labeling those resources under their own brand.
Not only is there a clear opportunity for employers to invest in financial wellness programs to seek to maximize productivity by minimizing personal finance-related stress in the workplace, but there are also heightened risks of regulatory fines and penalties from the U.S. Department of Labor. These regulations are aimed at company retirement plans that fail to provide plan participants with the tools and guidance they need to make the most of their retirement plan savings and investments.
Given this extra layer of liability, it will be more important than ever for plans sponsors and employee benefits companies to pair up with the best possible financial wellness provider to give plan participants a better sense of their options and better prepare them for the future.
See the original article Here.
Source:
Kent R. (2017 June 21). 3 key point for choosing a wellness provider [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/opinion/three-key-points-for-choosing-a-wellness-provider
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
Unrealistic Expectations Muddy Employee Retirement Planning
Many younger employees have unrealistic dreams when it comes to planning their retirement. Here is a great article by Paula Aven Gladych from Employee Benefit Adviser on what you can do to help your millennial employees plan for their future retirement.
Three generations of U.S. investors accept that they are largely responsible for funding their own retirements. But many of them harbor unrealistic hopes of receiving a sizable inheritance as part of their funding plan.
These were among the conclusions drawn by a recent survey of 750 individual investors with a minimum of $100,000 in investable assets—including 223 millennials, 251 Gen Xers and 236 baby boomers.
The 2017 study was conducted by the U.S. research arm of Natixis Global Asset Management, a French company that is one of the 20 largest asset managers in the world. It found that 78% of investors recognize that more of the retirement funding burden is falling on their shoulders, since their employers have begun offering defined contribution retirement plans in lieu of defined benefit pension plans. And many also believe that Social Security won’t be available to them by the time they retire. But a significant percentage (43%) hope to receive an inheritance that will help them compensate for any savings shortfall.
This is especially true of millennials, who are twice as likely as baby boomers to expect that a financial windfall from their parents or grandparents will play an important role in meeting their retirement needs. Per the survey, 62% of millennials, compared to only 31% of boomers, anticipate receiving an inheritance that will help fund their retirement.
That’s a major disconnect, says Dave Goodsell, executive director of the Natixis Durable Portfolio Construction Research Center, which carried out the research. He points to findings that 40% of baby boomers don’t plan to leave an inheritance and 57% don’t think they will have anything left to pass down to their children or grandchildren. Only 56% even have a will in place.
Further exacerbating the situation, many of the investors surveyed underestimate the amount of savings they will need for retirement. They assume that they will only need replace 63% of their pre-retirement income, according to Goodsell, which is at odds with the retirement industry’s more conservative target of 75% to 85%.
Looking to the kids
Apart from an inheritance, many of the investors surveyed also believe they can count on their children for some sort of support when they retire, either through shared living arrangements or some type of stipend or allowance. “Retirement has become a multigenerational question,” Goodsell observes.
On the other hand, only 37% of the respondents say they expect Social Security to be an important source of income for their retirement. “There’s a great deal of skepticism,” notes Goodsell, “which should serve as a motivation to plan ahead for retirement and set realistic savings and spending goals.” Unfortunately, he adds, many investors’ decision making is clouded by unrealistic expectations.
Workplace 401(k) plans encourage savings discipline, since they make it easy for employees to save automatically. But in and of themselves they are insufficient, says the Natixis researcher, and employers need to help their employees make better financial determinations by providing them with retirement planning tools, including access to a financial adviser.
“Access is critically important,” he says. “Because responsibility is being shifted off to individuals, we need to make sure they have access to the right resources and understand how to use them.”
Key topics that need to be addressed, according to the survey, include financial planning basics, such as budgeting; how to manage and plan for required minimum distributions; tax, estate and long-term care planning, as well as managing debt and credit cards and understanding investment risk.
See the original article Here.
Source:
Gladych P. (2017 June 25). Unrealistic expectations muddy employee retirement planning [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/news/unrealistic-expectations-muddy-employee-retirement-planning?brief=00000152-1443-d1cc-a5fa-7cfba3c60000