Download to read offline
SCA_PP_BENEFITS_5.20
- 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 MoneyMean to Your Employees? Where did we learn about money? What’s the proper name of our money?
- 4. We haveaccess 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 willyou 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 AccountBalance 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 SocialSecurity 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 yourself1st! 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 saysit 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 yourselffirst 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 Adaptionof 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 ofyour 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 affordablemedical 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 powerof 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 offera 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 financialstress 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 percentof 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 yourcompany’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 goesbeyond 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 relievingsome 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 theTraditional 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%.
- 25. Summary Questions,Comments, Thoughts? Thank You For Attending!
- 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
- #4 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.
- #5 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
- #6 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
- #7 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?
- #8 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.
- #9 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.
- #10 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
- #11 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!
- #12 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.
- #13 -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?
- #14 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
- #17 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.
- #18 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?
- #21 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.
- #24 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.
- #25 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%.