Don’t settle … it’s time to review

Let’s face it – reviewing your employer-sponsored retirement plan may not be exciting, but avoiding it may hurt your employees’ ability to reach their retirement goals and cost your business in the long run. It's generally a good idea to review your plan annually. If you haven't given it a thorough review within the last 12 months, now may be a good time to do so.

Here are 3 reasons why you should take a fresh look:

High fees

When it comes to saving, many people are more focused on their return and have no idea that high fees are consuming those earnings. According to the Investor Pulse Survey from TD Ameritrade, 27% of Americans who participate in a 401(k) think they know how much they are paying in fees. However, 37% mistakenly believed they were paying no fees at all. You may look at your plan fees and assume they’re reasonable, but in what context?

Understanding your fees can ensure that you’re not overpaying. Think about the level of service you’re receiving in comparison to how much you pay. Are you using an older plan, or do you have the most recent design with all the latest features and options? Additionally, do some benchmarking and compare your provider to others. Often times, you can get more for the same price.

Lack of employee engagement

Not everyone is willing to invest. This is especially true when employees aren’t budgeting or are still paying off student debt. One of the first steps toward getting your employees engaged in a 401(k) is to promote financial literacy.

Automatic enrollment automatically enrolls eligible employees into your 401(k) plan and allows them to contribute a portion of their salary at a predetermined rate. Many employers also offer contribution auto-increases. Each year, the auto-increase will automatically raise your contribution percentage by a specified amount. This can drastically increase employee participation and improves your employees’ retirement readiness.

If you have the means, offering a 401(k) match is a powerful investment to make for your team. The truth is, many employees tend to save far below the level that is needed for a healthy retirement. If you can match a percentage of your employees’ 401(k) savings, it’s very likely that you’ll see more enrollment among participants and those enrolled saving at a higher rate.

The Tax Cuts and Jobs Act impacts retirement plans

You’re probably aware of the impact that tax reform had on your business or personal taxes, however, tax reform also impacts your 401(k) plan. Thanks to the Tax Cuts and Jobs Act, businesses are able to expand benefits for their employees. Many have increased their matching contributions or provided raises to employees which has enabled them to increase their personal retirement savings.

Remember that the key point of your company’s 401(k) plan is to help your employees be financially prepared for retirement. To this end, focus on the needs of your employees and take the time to empower them with the education and consultation they need. A “plan health review” of your retirement may be just what you and your employees need to make sure everyone is heading towards a successful and happy retirement together.

Published in Retirement

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