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Boosting Your Retirement Savings

Published by Kim Moore on Oct 5, 2020 6:00:00 AM

A survey conducted by John Hancock indicates that only 44% of Americans say they believe they are on-track for their needed retirement savings. As the Plan Sponsor of a 401(k) Plan, you want to help your employees reach their goals so they exit their employment with your company ready to move on to the next phase of their life prepared. We have put together a few suggestions below based on additional data gathered by John Hancock as part of their recent survey:

  1. Participants in their 30’s – average retirement savings = $32,602arrow_climbing_gold_coins
    • For these individuals the key is to get saving as early as possible and then to increase the savings amount as their income level grows. We recommend implementing auto-enrollment which usually increases participation levels in the 401(k) Plan. Also, implementing an automated deferral increase provision which allows for increased savings as the employee moves forward and is better able to devote more of their salary to savings. This auto-escalation provision is often implemented with auto-enroll. It requires the Plan to automatically increase deferrals usually by 1% increments each year after the initial year up to a specified maximum percentage such as 8%.

  2. Participants in their early 40’s – average retirement savings = $61,993
    • For these individuals, it is important to maximize any additional savings opportunity. These participants should ensure they are deferring in such a way as to maximize the match or profit share potential within their Company plan. Look to guidance from your 401(k) service provider in this area that you can provide to your participants to help them better understand this area.

  3. Participants in their mid to late 40’s – average retirement savings $113,370
    • Surveys show that employees reach their peak earnings potential during the ages 44 to 55. It is important for this group to maximize all saving potential. Encourage deferrals on bonuses, raises, or other less routine income sources. Plans can dictate that bonuses must have 401(k) withholdings.

  4. Participants in their 50’s – average retirement savings = $133,626
    • In this age group, catch-up contributions are allowed. Make sure you communicate to your employees the availability of this option to increase savings. Ensure your payroll process is set-up to accommodate catch-up contributions.

Working with your 401(k) service provider and Investment Advisor to provide information directed to the different ages of participants allow them to focus on the best options to maximize their savings.

As the plan sponsor, when it’s time to audit your plan, it’s vital that you hire an experienced auditor to ensure your plan is in compliance. At Summit CPA we specialize in retirement plan audits. We have the ability to offer assistance entirely off-site with little or no distraction to your daily office routine. We also offer flat-fee pricing so there are no surprises on your bill when the job is complete. For assistance contact our office at (866) 497-9761 to schedule an appointment.

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