1. Recruit Retain Reward
Keeping Your Employees Happy
Until They’re Ready to Retire
CEBS Spring Seminar
May 20th, 2015
2. Brett Anderson, CFP®, ChFC, CLU
President
St. Croix Advisors, LLC an Investment Advisory Firm
401 Second Street, Suite 205
Hudson, WI 54016
(651) 337-1919 (office)
www.stcroixadvisors.com
brett@stcroixadvisors.com
Welcome Everyone!
3. What Does Money Mean to Your
Employees?
Where did we learn about
money?
What’s the proper name of
our money?
4. We have access to a wealth of information on
retirement, it’s only a Google search away &
it’s hard to avoid on TV & in the media
Ex: Prudential Commerical 1
Current State of Readiness for
Retirement 93
95
101
85
77
86
89
5. Retirement Today vs. Your
Grandparents/ Parents Retirement
We are living longer.
The CDC recently reported
that the U.S. life expectancy at
birth for the total population
was 78.8 years in 2012— an
increase of 0.1 year from 78.7
years in 2011. 2
6. Work provides:
Structure
Accumulative income
Relationships
How does one stay relevant & fill the void
years after they retire?
Many People Define Themselves
by Their Work Profession
7. How will you fill the void in retirement?
It’s an extremely emotional decision, but always
mathematical
Paycheck vs. Mailbox Money
Too Many are not Prepared for the
Lifestyle They Desire
8. Average 401k Account Balance
is$60,000 in the U.S. 3
People within 10 years of
retirement only saved an
average of $78,000 3
More than ½ have
no retirement plan 3
How Ready are Americans for
Retirement?
9. With Social Security averaging $14,780 a year for
individuals and $22,000 for couples, many Americans
will exhaust their savings in just a few years.3
The average savings account balance in the U.S.
was $5,923 in 2011.4
Ready for Retirement Cont.
10. Pay yourself 1st!
Contribute at least 10% of your income for retirement
every year
Save at least 8 times your final income for retirement
Shoot to replace 70-80% of your pre-retirement
income during retirement
There’s a gap!
What’s the Magical Equation?
11. WSJ says it beautifully, “Wealth isn’t about money; It’s
about the freedom to do what you want.”
We may need to change our expectations…
The New Retirement
12. Pay yourself first
Debt limits our future lifestyle
Financial psychologists say the drive to splurge and keep up
with the Joneses is rooted more in psychology than a lack of
financial skills. Animal brain thinking, the need to fill a void
or the desire to simply impress, can drive people to
irrationally overspend on material items. 6
Maximizing employee benefits is key
What are you offering your employees & do they understand
what’s being offered?
Going Back to the Basics
13. Need for Adaption of the Aging
Workforce
Lack of savings forces
people to work longer
1/3 of organizations are examining
policies and practices to address the
demographic change.7
New federal-employee phased
retirement program
Are employers ready for an aging
workforce?
14. Regardless of your full Social Security retirement age, which
ranges from 65 to 67, you can collect retirement benefits as
early as age 62 as long as you’ve paid into the program for at
least 40 quarters or about 10 years. (Widows and widowers can
collect survivor benefits at 60.) However, for each year you
delay, your benefit increases by about 8% until age 70.8
When you continue to work and draw Social Security, your
benefits are reduced temporarily if you’re 65 or younger and
your outside income exceeds certain levels. After 65, these
reductions do not apply. You may owe taxes on your Social
Security Income.9
Basic Mechanics
Social Security
15. Finding affordable medical insurance is a critical
part of retirement planning, particularly if you
want to retire before age 65, the eligibility age for
Medicare. By getting the right kind of insurance,
you help protect yourself against the threat of high,
uninsured medical costs, which can blow up the
careful plans you've made for your retirement.
The Healthcare Gap Until Age 65.
16. The power of inflation
Potential decline of purchasing power
could meet the retirement needs of the
individual early in retirement but fail to
meet his or her needs ten to fifteen years
into retirement.
No one thinks they’re on the bad end of
statistics
Your Employees Will Need More
Than You Think in Retirement
Average life expectancy in the U.S.
Women outlive men
17. You offer a host of benefits: 401k, Profit Sharing,
Stock Options, etc.
Will your company participate in a “phased
retirement” plan?
What’s your company’s philosophy on the level
of replacement income employees need?
Are Your Benefits Meeting Your Employees’
Long-Term Retirement Goals?
18. Employee financial stress is costing your company money.
Every year financially related stress triggers lower
productivity, absenteeism, health problems and employee
turnover in the workplace. As the finance world becomes
even more confusing and healthcare costs skyrocket, it is
more imperative than ever to put in a plan in place for
financial education that will benefit the workforce.
Employers can stay ahead of the game and offer
competitive benefits that recruit, reward and retain
employees and at the same time contribute to a financially
secure future. It’s a win- win situation.
Incorporating Financial Planning &
Education for Your Employees
19. 48 percent of large firms having adopted financial wellness
programs; up from 35 percent in 2013. 11
The smaller the company, the less likely that it offers any
financial education other than on retirement, but larger firms
have, since 2013, begun to add planning for health care costs (64
percent), budgeting (40 percent) and managing debt (43
percent).11
Plan sponsors using these programs believe they pay off, since
they report employees using them are more satisfied (78
percent), loyal (70 percent), engaged (68 percent) and
productive (57 percent).11
Merrill Lynch’s Workplace
Benefits Report
20. What’s your company’s philosophy on retirement preparation?
There’s a gap between employee benefits & life
Does your company benchmark benefits to be competitive in the
marketplace?
Creating a Culture That Helps Your
Employees Achieve Their Goals
21. Risk management
Healthcare
Short and long term disability
Long Term Care Expenses
Longevity risk and premature deaths
Other risk transfers planning ideas
It’s Not All About Offensive Financial
Planning, What About Defensive?
22. Google goes beyond the basics &
offers on-site physicians & nurses,
free food, fitness facilities, massage
rooms, hair dressers, laundry rooms,
comprehensive health care coverage,
travel & emergency assistance (even
on personal vacations), new parents
get time off and extra spending
money, higher education
reimbursement, and legal advice at
no cost just to name a few.
Google- Google’s Benefits
23. By relieving some everyday life expenses, your
employees will have more room to contribute
money into their retirement savings because of
company perks.
Do your current employee benefits recruit, reward
and retain your employees? Do you consider your
company’s benefit package competitive, elite or
below average?
We Know, You’re Not Google
24. Going Beyond the Traditional
Employee Benefits Meeting
What is good for you is good for your business.
Helping employees understand their benefits
How prepared are your employees?
It’s a shift from where you had social security, pension
and your retirement account. Now you are down to
social security and 401k. Someday are we going to be
down to 401k? Once upon a time, all three would
replace 80% of your retirement income – now probably
under 50%.
26. 1 - Prudential TV Spot, ‘Age Stickers’, 2014 -YouTube
2- Mortality in the United States, 2012 – U.S. Department of Health and Human Services
Centers for
Disease Control and Prevention National Center for Health Statistics
3- 401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2012 – Employee
Benefit Research Institute
4- Savings Account Balances Decline for Residents in Four Electoral Swing States, 2012 -
Pitney Bowes
5- The Importance of Being Solvent, 2014 –The Wall Street Journal
6- The Psychology Behind Keeping Up With the Joneses, 2013 – Mint Life
7- New SHRM Survey Finds Organizations Unprepared for Aging Workforce, 2015 - Forbes
8- When Should You Collect Social Security, 2014 -Forbes
9- The Trouble With Working Longer, 2015-Money.com
10- Life Expectancy in the USA Hits a Record High, 2014 -USA TODAY
11- Companies Embracing Financial Wellness, 2015 - benefitspro
Sources
Editor's Notes
Federal Reserve Notes, what’s the proper name of our money?
Chances we learned about money from our parents, family.
Lessons about money that I’ve seen and heard from.
We have access to a wealth of information regarding retirement; it’s only a Google search away and we can’t avoid the subject on TV or in the media. How ready are we?
In a recent Prudential1 commercial, Professor Daniel Gilbert asked people a simple question: How old is the oldest person you've known? Although people are living longer, the official retirement has not changed. He shared in the commercial that he was a kid, the average age expectancy was about 61 and the retirement age was 65.
https://www.youtube.com/watch?v=jdVop4AQqIk
It’s changing.
We are living longer. The CDC recently reported that the U.S. life expectancy at birth for the total population was 78.8 years in 2012— an increase of 0.1 year from 78.7 years in 2011.2
Many people define themselves my their profession. (Ex: Doctor, Police Officer) Work provides structure, relationships and accumulative income. How does one continue to stay relevant and fill the void, even years after they retire?
Too many people are not prepared for the lifestyle they desire. Does it include purchasing a second home, traveling, pursuing hobbies, volunteering or starting new career, working part-time?
It’s an extremely emotional decision to retire and always mathematical. Calculating the cost of the lifestyle you want is an imperative part of retirement planning.
When you run the math going from earning a paycheck to mailbox money it takes confidence to know your financial plan is in place.
Average 401k account balance? The average balance in all 50 million 401(k) accounts is just over $60,000, according to the Employee Benefit Research Institute. Even people within 10 years of retirement have saved an average of only $78,000, and more than a third of them have less than $25,000. More than half of U.S. workers have no retirement plan at all.
With Social Security averaging $14,780 a year for individuals and $22,000 for couples, many Americans will exhaust their savings in just a few years.3 401(k) s are a sole source for retirement saving for many.3
Average cash reserve balance? The average savings account balance in the U.S. was $5,923 in 2011, according to a 2012 report by Pitney Bowes, a document-management services company.4
How much do we need to save for retirement? Many financial gurus advocate for paying yourself first by automatically saving at least 10 percent of your income for retirement every year, plan on saving at least 8 times of your final income for retirement and shoot to replace 70-80 percent of your pre-retirement income during retirement.
We have a gap!
Can one still achieve financial freedom?
Yes. But you may need to change your expectations
-We don’t need fancy cars, big homes and expensive suits to impress others
-A Wall Street Journal article summed it up the best, “Wealth isn’t about money; It’s about the freedom to do what you want.” 5
You might save money by raising the deductibles on your insurance policies or scaling back the cable TV package. But the big savings would likely come from living in a more modest home, driving fewer or less-expensive vehicles, and getting your debts paid off.
-Paying yourself first. Establishing this habit early can lead to increased financial security later in life.
-Debt limits our future lifestyle. Everyone is trying to keep up with the “Joneses” or in modern terms “The Kardashians”. Financial psychologists say the drive to splurge and keep up with the Joneses is rooted more in psychology than a lack of financial skills. Animal brain thinking, the need to fill a void or the desire to simply impress, can drive people to irrationally overspend on material items.6
-Maximizing employee benefits can be key. Matched contributions are like free money. What are you offering your employees and do they understand what’s being offered to them?
We’re living longer, employers and employees will need to adapt
Because of the lack of savings, individuals will need to work longer.
Are employers ready for an aging workforce? Implications good or bad? The Society for Human Resource Management (SHRM) found that organizations are unprepared for an aging workforce, with just over one-third of organizations examining policies and practices to address the demographic change.7
A new federal-employee phased retirement program began accepting applications last fall. Federal employees who take phased retirement will work 20 hours a week and receive half their pay and half their retirement annuity payout. A requirement: to devote 20 percent of their time mentoring other federal employees, who will probably take over the reins from them when they finally move on.7
The average life expectancy for men is 76 vs. women 81. 10
The power of inflation and how it can erode your retirement savings. While inflation typically only slightly increases the cost of goods and services from year to year, it represents a serious risk and challenge for retirement planning. A retirement income plan that does not take into account inflation and the potential decline of purchasing power could meet the retirement needs of the individual early in retirement but fail to meet his or her needs ten to fifteen years into retirement.
The problem with statics no one else thinks they’re on the bad end.
Your company offers a host of benefits: 401k, Profit Sharing, Stock Options, etc.
What’s your company’s philosophy on the level of replacement income employees need?
How prepared do you want your employees? There’s a gap between employee benefits and life. Employers can’t fill in the gap 100%, but they can do their part by making sure their employees understand what is being offered to them, why it’s important and how to maximize their benefits.
By offering supplemental benefits, not only do you recruit, retain and reward, but you also free up daily expenses for your employees. By relieving some everyday life expenses, your employees will have more room to contribute money into their 401ks because of company perks. Example supplemental benefits may include: flexible work schedule, day care vouchers, company car or cell phone, parking reimbursement, bus passes, home & auto insurance, life insurance, paid vacation with cash bonus, free meals, company sponsored fitness programs, company retreats and free memberships just to name a few popular additions.
Helping employees understand how these benefits work beyond the premiums.
Employees are becoming 100% responsible for their own financial future, but are they prepared for this? I suspect most are not. It’s a shift from where you had social security, pension and your retirement account. Now you are down to social security and 401k. Someday are we going to be down to 401k? Once upon a time, all three would replace 80% of your retirement income – now probably under 50%.
