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Want a build a great retirement plan? Think like a farmer

I often joke that I am “just an Iowa farm boy” as a way of explaining my preference for the simplicities in life and the sustainable values that were instilled in me from a young age, such as being instructed to save 15% of every paycheck upon earning my first job in high school — a practice I still do.

I think the expression says a bit more, however. Growing up on a farm was about diligence and routine. The cattle had to be fed, chores done, and so on in a daily loop. The actions were most definitely repetitive, and it takes a patient person to maintain that sort of diligence, because reward is sometimes hiding in the routine. It takes time for a seed to grow to be harvested, or a calf to become a steer.

farmer

But if the farmer mismanages the day-to-day of the farm? It may not mean just a bad crop, but a lost farm. Diligence is everything.

Plan sponsors have a similar responsibility. They must be diligent in all the thankless tasks that occur behind the scenes. The farmer plants the seed; the farmer harvests the crop. Let’s not forget the farmer pulls the weeds.

Mid-year duties
So now, plan sponsors have mid-year duties to contend with, or should be thinking about changes or improvements they would like to make for next year. Consider:

  1. Administrative. Has the 5500 been completed or extended? At this stage of the year, most administrative tasks should be complete or well on their way. Begin thinking of end-of-year notices now, too. No one has ever been reprimanded for being ahead of the curve.
  2. Benchmarking. Have the plan’s service providers been benchmarked for fees and services recently? Now is the time to conduct this test if the answer is no. You may find that the fees paid are not commensurate with the services received, and a change is necessary. Doing this now would put a new service provider in place for the first of the new year. Look at all the service providers — adviser, recordkeeper, TPA and so on. Benchmarking takes time and transitions take time, more than one may think.
  3. Action plan. Coming into this year, an action plan of goals and how to achieve them should have been in place. Is the plan on track to meet those goals? Now is the time to make any adjustments. And if the plan is nowhere near the goals that were set, there’s still time for one last Hail Mary pass. This time of year means that farms are either beginning or gearing up for the harvesting season. The routine and diligence is beginning to pay off. For plan sponsors, the reward may be far off yet, or they may never see the fruits of their labor. Retirement for many participants is a long way off, and the seeds that plan sponsors plant today with their diligence and oversight may not blossom before life takes them elsewhere. But still, pull the weeds.
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