Plan Sponsors Ask…


Q: How important is it to deliver targeted messages as we attempt to engage, communicate with and educate different participant demographics in our retirement plan?

A: In a word, very. Targeted communications and relevant tools, like mobile apps and online planners — preferred by 66% of Millennials and Baby Boomers, according to Willis Towers Watson — are critical devices to have in your retirement plan education arsenal. Each generation has different concerns, and so the guidance and messaging you deliver needs to be tailored to reflect them. For example, education is especially important for Boomers, many of whom are actively preparing to retire. In this group, one in four has saved less than $5,000 for retirement, according to an Indexed Annuity Leadership Council (IALC) survey. Pensions aren’t much help, either — an estimated 56 million Boomers aren’t expected to receive any pension income, according to the Insured Retirement Institute (IRI), and future retirees will need more than $400,000 to fill the gap.

Research from NerdWallet suggests that for Millennials to accumulate  enough for retirement, their savings rate needs to be at 22% starting now to accommodate for lower projected market returns.1 However, many are focused on paying off student loans, and an Allianz Life study shows 70% prefer to travel than to save. Educating this demographic about the importance of saving early, and illustrating for them how concepts like compounding make a significant difference over time, as well as showing them how today’s savings translates to tomorrow’s income, are key in convincing them to grow their nest egg along with planning trips to exotic locales.2

What’s more, Willis Towers Watson found that 59% of Millennials and 54% of Boomers valued tools to help them track retirement goals. These are just some examples of how tailoring key messaging and offering access to retirement planning tools can make all the difference in helping various generations get on track to more financially comfortable retirements.

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Q: Some of our participants are asking questions about how to withdraw their money from their retirement accounts. Should we be worried?

A: While 45% of employees are worried about running out of money in retirement, 43% say it’s likely they’ll need to meet today’s financial obligations with savings earmarked for their golden years, according to a 2016 PwC survey. That’s up considerably from 35% in 2015, and 27% in 2014. Millennials are most at risk — 50% said they are most likely to access retirement funds for other needs. As an employer, you’re in a great position to help. Providing comprehensive and consistent education via a holistic financial wellness program that assists employees with cash flow and debt management, savings, retirement readiness, financial stress and productivity despite these issues can go a long way toward helping them make better choices when it comes to saving for retirement and achieving their long-term goals.

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Q: Our company offers a health savings account (HSA). Is there a way to tie its benefits into our retirement plan communications?

A: Absolutely! With healthcare costs rising in the U.S., HSAs
are gaining popularity. In fact, some experts predict they’ll be as widely used as 401(k) plans. Research firm Denevir estimates that HSA assets will grow to more than $50 billion in approximately 30 million accounts by year-end 2018.

You can accentuate the positives of HSAs by focusing on their triple tax advantages: contributions go in tax free, investment earnings grow tax free as long as they’re used for medical expenses, and distributions used toward medical costs come out tax free as well. You might call that a win-win-win.

What’s more, workers can take their HSA accounts with them from one employer to another. They can also be used for qualified healthcare costs after retirement — an added benefit. According to Fidelity, the estimated cost of healthcare in retirement hit a record $260,000 for a 65-year-old couple retiring in 2016 — a 6% increase from last year and the highest since the firm began its predictions in 2002. Further, an Edward Jones survey found more than half of Americans are worried about how they’ll afford healthcare in retirement.

Given these trends, a targeted education and communication program about the tax benefits of HSAs and how they can help offset healthcare expenses in retirement might be just what the doctor ordered.

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