By Cyril Tuohy
Congress has declared Oct. 19-25 National Save for Retirement Week, so advisors and employees should be prepared for an onslaught of tips and advice courtesy of their insurance carriers and retirement-services providers.
The most effective way to encourage employees to save is through their workplace retirement plans. Insurers promoting employer-based retirement planning are reminding employees to get started if they haven’t already done so.
Teachers Insurance and Annuity Association-College Retirement Equities Fund (TIAA-CREF), has posted to its website six rules to help consumers ensure a comfortable retirement.
“Now is the time to sit down with your spouse or partner and your financial advisor to take a serious look at the financial side of your retirement plans,” TIAA-CREF advises.
The six rules of saving for retirement are:
- Save with an outcome in mind.
- Cover essential living expenses with guaranteed income.
- Take advantage of tax-deferred savings and plan carefully with regard to Social Security withdrawals.
- Factor in health care expenses.
- Adapt the investment strategy to inflation and market volatility.
- Prepare for your legacy.
MetLife said it will use the week to remind employers how important it is to communicate with employees about the benefits of retirement savings programs.
MetLife's Stay on Track initiative offers 17 slides available on the Web, reminding employees that when it comes to saving for retirement, “You’re the boss.”
Pitfalls to avoid when funding a retirement plan include interrupting the contributions, borrowing from the plan, and not maximizing the employee contribution, MetLife said.
Lincoln Financial Group offers consumers worksheets to help them calculate discretionary spending and retirement priorities, as well as contribution and retirement planning tools.
Every year that goes by sees the responsibility of retirement planning fall further on the shoulders of employees as defined benefit plans fade into oblivion.
More employers, therefore, have taken it upon themselves to encourage employees to maximize all the tools they have at their disposal to set funds aside for the future.
Perhaps the most important rule of all is to hire a good advisor. Some employer-based plans offer advice along with 401(k) benefits, but advisors or employers can’t help employees if they don’t get started at accumulating a retirement fund balance.
Fund balances held in 401(k) accounts and other defined contribution plans reached $5.9 trillion at the end of last year, according to the Investment Company Institute.
Median 401(k) balances at the end of 2012 for a group of employees who participated consistently in their 401(k) plan over a five-year period from 2007 to 2012, was $49,814, according to the Employee Benefit Research Institute.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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