Retirement security can be achieved with the right planning and coordination.
Employers can help workers prepare for retirement through holistic financial education programs.
Certain types of legislation may help people save more for retirement.
There are many measures individuals, employers, and policymakers can put in place to promote a healthier path to retirement security for today’s workers.
Start saving early, commit to the automatic escalation of contributions to a 401(k) plan, and contribute at a rate that, at a minimum, maximizes the company’s match. When both spouses have access to a 401(k), both should contribute to their own plan so they don’t forfeit any company match that might be available.
Track retirement savings progress in terms of an income goal rather than a savings goal, targeting a realistic retirement age.
Think longer-term. Married women need to think long-term because they generally live longer than men and this longevity difference makes them more likely to experience widowhood.
Consider working a few years longer, and take advantage of catch-up contributions, especially if behind on your savings goals. Working longer delivers triple benefit. It delays Social Security benefits by a few years, which lets you receive higher monthly benefits. It allows you to accumulate savings for a few more years. Finally, it reduces the number of years you’ll need to draw down retirement savings. Women and men 50 and older are eligible to make catch-up contributions to their retirement accounts over and above standard contribution limits.
Consider insuring retirement income against longevity and market risks. Guaranteed income products, such as annuities, can help insure against these risks and are available in an increasing number of 401(k) plans.
Carry an adequate amount of life insurance. Both spouses should carry an adequate amount of life insurance to ensure that, should their income disappear, their spouse can pay off outstanding debt and maintain their lifestyle.
Coordinate workplace employee benefits. Two-income spouses, who are each eligible for their own company’s employee benefit options, should evaluate the costs and features of both sets of benefit packages (e.g., deductibles, copayments, etc.) in order to obtain sufficient coverage, minimize costs, and lessen any tax implications.
Provide financial wellness education and programs that help traditional employees achieve the foundational elements of financial security: managing day-to-day expenses, protecting against key financial risks, and achieving important financial goals.
Educate married employees about the potential need to save for two if one spouse doesn’t have access to a 401(k) or similar retirement savings plan.
Provide education on how much income will be needed in retirement to cover expenses, and on identifying potential sources of income (e.g., Social Security, personal savings, retirement plans, and annuities). Planning tools can help employees set and gauge progress against retirement-income objectives.
Enhance 401(k) plans to help employees achieve more certain outcomes through features such as automatic enrollment (and re-enrollment), automatic escalation of contributions, employer matching contributions, and in-plan guaranteed lifetime income products that help to reduce the level of 401(k) savings employees need to generate their desired level of retirement income.
Offer Qualified Default Investment Alternatives, such as target-date funds, in 401(k) plans. Fifty-three percent of surveyed finance executives say plan participants are apt to make better investment decisions when presented with pre-packaged diversified investments like target-date funds.1
Help employees save for future healthcare expenses by offering health savings accounts (HSAs), which allow account owners to make tax-deductible contributions, earn tax-free interest, and make tax-free withdrawals for qualified medical expenses now or in retirement.
Provide a robust and customized benefits lineup that meets the needs of the employee base. Use data analytics to gain insight into how plan design drives employee behavior, and to design benefits that optimize employee outcomes for employees.
Pass legislation to make it feasible for more small employers to offer 401(k) plans in the form of multiple employer plans (MEPs). MEPs allow small businesses to band together to offer joint plans and eliminate unnecessary administrative and compliance burdens currently associated with those plans.
Create safe harbors that address potential employer concerns regarding the addition of guaranteed lifetime income products to 401(k) plans.
Adopt regulations that require defined contribution plans to project future monthly income on participant statements.
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