Risk & Business Magazine CEO/CFO Business Today Magazine Winter 2018 | Page 25

RETIREMENT SAVING Help! My Employees Aren’t Saving Enough For Retirement! BY: DAN STROH Three Strategies Employers Can Utilize To Nudge Employees Toward Saving More Y ou have likely heard warnings about the impending “retirement crisis”—that Americans are not doing a great job of saving for retirement. Unfortunately, this is true. One of the world’s largest investment management companies, Vanguard, produces an annual report titled How America Saves. The most recent version of this report indicated that the average American’s 401(k) balance in 2016 was just $96,495. Because of this troubling number, many employers are trying to find solutions within their company retirement plans to push employees toward saving more. As a result, they’re creating Next Generation Retirement Plans. One feature of Next Generation Retirement Plans is auto-enrollment, sometimes called an Automatic Contribution Arrangement. Under this strategy, employers automatically enroll newly eligible employees into a company retirement plan. Employees can, of course, opt out if they wish. A recent study by the Principal Financial Group found that only 15 percent of automatically enrolled participants opted out. Additionally, plans with an automatic enrollment feature have been found to have 34 percent higher participation. A second key component of Next Generation plans is to make sure participants save enough. When auto- enrolling participants, an employer also sets a default deferral amount. This is a hands-off way to nudge your employees to begin saving for retirement and simplify the selection of investments. The auto- enrollment feature can start employees at just one percent or two percent of pay and direct their funds into an age-appropriate target date fund or other option. The target date is the approximate date when investors plan to start withdrawing their money. Generally, the asset allocation of each fund will change on an annual basis, with the asset allocation becoming more conservative as the fund nears the target retirement date. When auto enrolled, fully 68 percent of the automatically enrolled participants kept the default deferral amount. This can become a problem, however, if the deferral amount is set too low. To combat low deferral amounts, Next Generation plans often will utilize automatic annual contribution increases. More than 83 percent of plan participants in a recent retirement study continued their contribution increases when the escalations were automatic. The above items are just a few of the Next Generation Retirement Strategies that your business should consider. By utilizing auto-enrollment, auto-deferral, and auto- escalation, an employer helps get their employees started on a path to retirement. Do you have a Next Generation Retirement Plan? For a complete review of your current retirement plan structure and a discussion about your best strategies moving forward, contact Dan Stroh of Snider, Fuller and Stroh at [phone] or [email protected]. + Dan Stroh, Executive Vice President, has been a Benefits and Financial Advisor with the firm since 2010 and works with both groups and individuals on health insurance, retirement planning and life insurance. In addition to his securities license, Dan is one of the first advisors to complete the UCLA Anderson School of Management courses for the retirement planning designation, C(k)P. This designation qualifies him as a specialist in 401(k) and Qualified Plans. Dan completed his bachelor’s and master’s degree at Ohio University and also holds life insurance, health insurance and annuities licenses. Dan is a Registered Representative with Kestra Investment Services, LLC. You can reach him at [email protected] 25