Don't Wallpaper Over the Costs of Retirement Readiness
Not every employer that sponsors a retirement savings plan relies on a financial advisor for assistance regarding the plan. You know the type, those do-it-yourselfers who prefer to tile their bathrooms, landscape their yards or wallpaper their dining rooms.
So what might prompt them to lay down their trowels – or at least seek assistance with their retirement plan management duties? Many plan sponsors who don’t currently rely on an advisor say they would consider hiring one if he or she could help reduce their plan’s overall costs.
Nearly three-quarters (73 percent) of retirement plan sponsors without an advisor said they would welcome advice on retaining plan assets to help lower costs, according to the 2015 MassMutual Winning Combination Study.1 Reducing costs ranked higher for these sponsors than other advisor attributes such as providing good customer service, educating employees or investment advice.
But some advisors say many sponsors do not fully understand the costs associated with retirement plans, particularly when it comes to investing in the retirement readiness of their employees.
For instance, incorporating design features such as automatic enrollment or auto escalation of contributions may create more administrative costs for sponsors. Over the long run, however, those features can potentially reduce an employer’s overall benefit and salary costs by improving employees’ retirement readiness.
Employees who work past the traditional retirement ages of 65 through 67 – the ages they first qualify for full Social Security benefits – typically cost employers more than younger employees for healthcare coverage, disability and Workers Compensation insurance, and other benefits. Older employees typically earn higher salaries than their younger counterparts as well.
So make sure sponsors understand the real costs associated with their retirement plan. While your clients may not fret over misaligned tile, they can’t wallpaper over the costs associated with the lack of retirement readiness for their employees.
Thomas Foster Jr. is Assistant Vice President, Strategy and Relationships, for MassMutual Retirement Services, a division of Massachusetts Mutual Life Insurance Co.
12015 MassMutual Winning Combination Study, https://www.massmutual.com/winningcombination. Online survey of 565 retirement plan sponsors, 449 who currently work with an advisor and 116 who do not currently work with an advisor. Two focus groups of six advisors each were also conducted.
This article is for informational purposes only and should not be construed as legal, investment, and/or tax advice. Please consult your own legal counsel and other experts regarding the specific application of the information set forth herein to your own plan and/or circumstances.