An Inter view with Jerr y Patterson
sponsors and was a top area for financial
professionals to help illuminate for plan
sponsors. (Brightwork Partners LLC
Study Article (PQ 11627 M)).
Its been written that creating better
outcomes for participants requires
a commitment from both the plan
sponsor and participant? Beyond
saving more for retirement, what
else should participants be doing to
get closer to their retirement goals?
Well, in this case we are talking about
a participants need to know more than
just their account balance. They should
have a retirement goal and know where
they stand. Do they have a clear picture
of how much income they’ll have on
the day they switch from a paycheck to
“mycheck”? Do they know how long
their savings may last?
For many, that means saving more for
retirement. They can take advantage
of of features/services that can help.
For instance, sign up for automatic
increases or be sure they’re receiveing
the full employer match.
Retirement savings isn’t one-and-done.
They should periodically review their
entire retirement picture (all their
employer benefits, Social Security
estimates, consolidation of previous
retirement accounts, etc.). There are
many planning tools and calculators
available to review their overall picture.
Many people simply drift into retirement,
failing to adjust their strategy as they
get closer to retirement. For those
approaching retirement, they need to
be looking at creating an income that
will sustain them throughout their
retirement. A portion of their savings
should be used to create guaranteed
income to cover necessities. They
should review their risk tolerance and
determine how much they would be
willing to keep in the market with
additional growth opportunity. They
should also consider their overall health
and estimate their health care coverage
and costs in retirement. Lastly, they
should look at social security benefits
and when would be the best time to
elect them.
income in retirement.1 This assumes
they would need about 85 percent of
pre-retirement income to maintain
their current lifestyle after retirement.2
Each individual’s situation is unique,
so savings and post-retirement needs
may differ.
Those in retirement may want to look
into the tax implications and may want
to consider having both pre and posttax assets.
1
In addition, everyone should take care
of their physical and overall fiscal health
to fully enjoy their retirement.
What does Principal believe are the
main drivers to better outcomes?
Both from the plan sponsor side as
well as the participant side.
For plan sponsors, plan design is critical.
It can help achieve improved participation,
average deferrals, and average account
balances.
For participants, it’s important to help
participants make great decisions right
away. Decisions around participating in
the plan, setting defferal amounts and
selecting investment allocation. Then
it’s important to keep the momentum
going to stay on track to and through
retirement.
All of these rolled into an engaging
participant experience can improve
savings rates, account balances, income
at retirement, and “on track” indicators.
Income replacement ratio comes up
frequently when employee retirement
readiness is discussed. Is there a
general target employees should be
aiming for?
In general, we have found that a
participant may need to save a Ё