I had the opportunity to attend a conference this week focused on employer sponsored retirement plans. I was excited to write the tip for this week; the conference has been a great resource for interesting retirement planning tips in the past. Sadly, there weren’t many exciting and new ideas to share. The conference focused on many of the same topics from prior years:
- Defined benefit pension plans are disappearing.
- Most Americans aren’t saving enough for retirement in their employer sponsored plans.
- Most enrollees in employer sponsored plans are ‘delegators’ that want someone else to figure out retirement savings.
- More plans are using automatic features to help their employees start, increase, and invest their savings.
As I reviewed these topics, I was reminded of my financial tip from last year about these ideas. The information is still relevant (perhaps even more relevant given the growing importance of retirement planning and the aging of the baby boomers).
While last year’s tip is still useful, there were some interesting conference ideas that were relatively new.
- More states (California, Connecticut, Illinois, Indiana, and others) are requiring that employers offer retirement plans or the employer must fund new retirement plans established for private employees and managed by the states.
- More studies are reporting that lump sum payments, where individuals cash out their retirement savings, are detrimental to an individual’s retirement. The movement to ban or at least restrict lump sum payments is growing stronger.
- As mentioned above, automatic options in employer sponsored plans are becoming more common. These are the automatic enrollment (and reenrollment) and escalation (see my article from last year for more info). However, plans are starting to consider automatic options to help employees withdraw income. Plans are considering automatically converting an employee’s retirement savings into an annuity to avoid a lump sum payout and reckless withdrawals from the plan.
- Some employer retirement plans are struggling to reach out to Millennials. Traditional channels are not as effective. Millennials will also change employers much more frequently than previous generations, so their retirement planning options will need to reflect this change.
Our Financial Tips of the Week are generally uplifting, and I feel this one isn’t, so I would like to end on an upbeat note.
National Save for Retirement Week is October 19-25, 2015. If you haven’t reviewed your retirement planning efforts recently, you might reserve an hour or two that week to review your retirement goals and options. If you have a light schedule that week, you might also consider reviewing your estate plan as the week is also National Estate Planning Awareness Week.