Retirement Expectation Versus Reality

February 19th, 2019

When expectation and reality differ, the results can be tough to take — especially when the subject is retirement. By communicating with employees in a way that recognizes both the perceptions and the realities, employers can smooth the transition from worker to retiree.

With this disconnect in mind, it’s important for employers to pay attention to key areas where worker expectations and retirement reality part ways. They may then be able to direct their communication efforts where they could truly make a difference. Read the rest of this entry »

Preferred Asset Allocation

February 15th, 2019

With the level of market volatility that we experienced in 2018, it is possible that your preferred asset allocation may be off target. Say, for example, that your target international stock allocation is 30% of your portfolio. In 2018, your international holdings dropped to 20%, due to weakness in global markets.

To re-balance your portfolio to its original target, you would sell enough of what increased in your portfolio to restore your international holdings to 30%.9

The Stock Market Drops. Now What?

February 7th, 2019

The Stock Market Drops. Now What?

In October 2018, the Dow Jones Industrial Average, a widely followed measure of stock-price performance of 30 of the largest U.S. companies, dropped 1,380 points in just two days. While that sounds scary, it was just a 5% move, taking the index back to mid-July 2018.

Still, you might have noticed that when your funds have been doing well, you feel pretty euphoric, but when they’re down, you feel a lot worse than the pleasure you felt when they were doing better. This is a psychological effect known as loss aversion, and it’s believed to be hard-wired in to our brains. The best way to respond to these emotional swings is to try to take emotion out of the equation altogether. Over long market cycles historically, markets have moved up, although, as always, they fall eventually. It’s that long historic sweep that you should focus on, not short-termmovements. You should also pay attention to the things you can control in investing and ignore what you cannot change. Here are a few tips to keep inmind:

Read the rest of this entry »

Is There a Secret Formula for Financial Wellness?

February 5th, 2019

There are many prescriptions to get to financial health. Here are four proven strategies to help you get there:

 Setting and sticking to a budget

In 2017, 78% of Americans said they were living paycheck to paycheck, up from 75% three years earlier.1 Part of the reason may be that only 41% of us use a budget,2 even though it’s one of the best ways to keep track of where our money goes.

Fortunately, it’s a pretty easy problem to fix. Try writing down what you spend every day for six months. At the end of six months, add up what you have spent in major categories (living expenses, transportation, dining out, and so forth), and see if what you’re spending money on brings you joy. If it doesn’t, time to create a budget! Budgeting is the process of taking control of your money, rather than trying to figure out where it went. Budgeting looks forward, not backward.

Saving for emergencies

Just 39% of U.S. households have the savings for an unexpected

$1,000 outlay,3 such as making out-of-the-blue house or car repairs. Many experts think you should have three to six months of living expenses stashed away. Saving up doesn’t need to be hard. Simply put $40 or $50 a month into an account, and let it build — it will help you feel more secure financially.

Paying down debt

The average household has $134,058 in debt, including credit cards, mortgages, and auto and school loans.4 We suggest attacking two kinds of debt first:

  • High-interest-rate credit cards: Every dollar you spend paying down a credit card that charges 19% per year is like getting a 19% return on that money.
  • Small credit-card balances: Maybe you signed up for a store credit card and used it once or twice. Carrying a small balance may not seem like a big deal, but retiring this type of debt can give you an emotional boost.

Planning for retirement

The median working age couple has only $5,000 saved for retirement, according to a Federal Reserve study.5 Unfortunately, most people don’t start saving until it’s too late. There’s even a big cost if you delay savings just one year. Look at how much money a 26-year-old gives up by delaying the start of contributions by just 12 months:

Your Starting Age Your Contributions by Age 65 Your Account Value at Age 65 The Cost of Waiting One Year
25 $48,000 $324,180  
26 $46,800 $299,008 $25,172

This is a hypothetical illustration intended to show how a one-year delay in investing might affect savings. It is not intended to depict the performance of any particular investment. Assumes monthly contributions of $100, an annual 8% hypothetical rate of return in a tax- deferred account, retirement at age 65, and no withdrawals. Savings totals do not reflect any fees/expenses or taxes. The accumulations shown would be reduced if fees and taxes had been deducted.

You may be able to achieve financial health simply by following these four guidelines.

1 Source: http://careerbuilder.com. National survey conducted online by Harris Poll on behalf of CareerBuilder from May 24 to June 16, 2018.

2 Source: U.S. Bank, CNN.com, October 24, 2016. https://money.cnn.com/2016/10/24/pf/financial-mistake-budget/index.html

3 Source: https://www.bankrate.com/banking/savings/financial-security-0118/

4 Source: https://www.nerdwallet.com/blog/average-credit-card-debt-household/.  Balances as of June 2018.

5 Source: https://www.marketwatch.com/story/the-typical-american-couple-has-only-5000-saved-for-retirement-2016-04-28

 

February Plan Sponsor Checklist:

January 31st, 2019
FEBRUARY PLAN SPONSOR CHECKLIST:

FEBRUARY PLAN SPONSOR CHECKLIST:

• Update the plan’s ERISA fidelity bond coverage to reflect the plan’s assets as of December 31 (calendar-year plans). Remember that if the plan holds employer stock, bond coverage is higher than for non-stock plans.

• Issue a reminder memo or email to all employees to encourage them to review and update, if necessary, their beneficiary designations for all benefit plans by which they are covered.

• Review and revise the roster of all plan fiduciaries and confirm each individual’s responsibilities and duties to the plan in writing. Ensure than each fiduciary understands his or her obligations to the plan.

The Ins and Outs of Long-Term Care

January 23rd, 2019

The Ins and Outs of Long-term Care

Imagine for a moment that your elderly mother slips and falls and breaks an arm and a leg. She is hospitalized and undergoes rehab — for 12 weeks. Most people think of chronic illnesses when they think of long-term care, but accidents can also trigger the need for extended nursing care, as well as physical and occupational therapy.

Read the rest of this entry »

Hoping For A Century?

January 17th, 2019

FMI: Hoping For A Century?

It’s funny, sometimes I run into people in the street who ask me how my grandfather is doing – not because they know him, but because I quite often write about him and how his advice has had such an influence on me.

I recently returned from Australia where I visited my grandfather each day in his nursing home. It was hard to see the change in him and how, at 99 years old, his body is clearly shutting down. His 100th birthday is in March and, as we say in Australia, “He has had a good innings.” But the question is, will he bat a century?  Read the rest of this entry »

Reminder: Check Your Tax Withholding

January 15th, 2019

FMI Check Your Tax Withholding

The Tax Cut and Jobs Act of 2017 included several provisions that could affect the taxes you pay in 2018 and in the future. If you haven’t already done so, be sure to check with your HR department or benefits manager to verify that you are not under- or over-withholding federal and state tax payments.

When Employees Ask For Advice About Retirement Savings

January 11th, 2019

When Employees Ask For Advice About Retirement Savings

Employees may ask you for advice about how much of their income they should be saving for retirement, how much they should already have saved, and how much they will need. It’s never a good idea to give one-size-fits-all answers to these important questions, but it’s good that you’re interested in helping participants learn more.

Read the rest of this entry »