7 habits of highly confident retirees
May 5, 2015 11:57 AM
Overview:
Concern about retirement readiness is top of mind for many employers, their benefit advisers and especially their employees. A BlackRock survey of retirement plan participants found most (92%) agree they stand to learn a few things about retirement confidence from current retirees. The company has identified seven habits that highly confident retirees practiced throughout their working career. They are easily understandable and easy for todays participants to emulate, the company says.
Essential habit No. 1: Making the most out of the savings plan
Many participants ignore their plans, but engaged participants regard their plan as a source of information and guidance, BlackRock says. They want to know the current best thinking about retirement savings and they act accordingly.
Employers need to think of new ways to keep their plans top of mind with their participants, the company says. One suggestion is to have participants annually review their 401(k) elections along with their health benefits. This creates a yearly contact point to help participants get engaged.
Employers need to think of new ways to keep their plans top of mind with their participants, the company says. One suggestion is to have participants annually review their 401(k) elections along with their health benefits. This creates a yearly contact point to help participants get engaged.
Essential habit No. 2: Increasing contributions to savings plan when possible
The most confident and successful retirees report increasing their contribution percentage after annual pay hikes, promotions and bonuses, BlackRock says. Auto-escalation features can help all participants achieve this automatically. In addition to auto features, employers should make it easy for participants to increase contributions when they get a raise or to defer part of their bonus into their plan, the company suggests.
Essential habit No. 3: Estimating retirement income
Successful retirees use in-plan tools and external resources to understand how their savings might translate into post-retirement spending. BlackRock suggests adding income projections to participant statements so they can track their progress toward their retirement income goals.
Essential habit No. 4: Reviewing strategy on a regular basis
Successful, confident retirees ask the question, Is this the way to get where Im going? Its an all-inclusive question, from their contribution to their work plan through to their additional savings and Social Security estimates, BlackRock says. The companys survey shows that retirees value advice from their former employersin fact, they wanted even more. They suggest employers offer access to holistic tools that help participants assess their entire retirement picture.
Essential habit No. 5: Changing investment mix as they age
A 25-year old with forty years of earning potential ahead of her should not have the same asset allocation as a 65-year old set to retire next week, BlackRock says. Employers should reach out to tenured employees and encourage them to review their previous choices.
Essential habit No. 6: Enrolling early
For some plan participants, unfortunately, it is too late to start early. But the clear connection between tenure in a workplace savings plan and retirement security should motivate late starters to get going, BlackRock says. Even if it is too late to start early, reenrollment into a target date fund or other QDIA with an appropriately high default deferral rate will help prevent procrastinators from waiting any longer, the company suggests.
Essential habit No. 7: Saving the maximum
Successful retirees sacrificed to save the maximum, including the catch up provisions allowed for participants older than 50, BlackRock says, suggesting, There are many ways to gently persuade participants to save more. One of the most effective is by adjusting the employer match. Matching 100% of a participants first 4% in contributions is roughly the same cost to the plan as saving 50% of their first 8%, the company says.
