Use Plan Analytics to Evaluate Your Retirement Plan
Your retirement plan is a valuable resource for your employees and serves as a vehicle to attract and retain top talent. Ensuring plan success is crucial. Examining plan analytics can help evaluate its success.
Plan analytics you should explore:
- Median age, tenure and savings rates of plan participants
These analytics can be helpful to determine which age groups are not strongly participating and may be encouraged to do so via on-site meetings, focused mailings and other communication and education.
- Participants not contributing sufficiently to receive all eligible employer match
Participants “leaving money on the table” can be studied to explain why contributing to the employer match maximum is so advantageous (e.g., with a 50 percent match, participants automatically earn 50 percent “return” on their contribution before any investment gains occur).
- Participants, by age, in each target date fund
Another demographic that can be helped by focused participant communications.
- Participants taking loans
It is important for plan fiduciaries to determine if the plan loan provision is being abused. This can result in significant asset leakage with participants and oversight concerns for plan fiduciaries.
- Loan default rates
Loan defaults also create problems for participants (taxation and penalties for premature distributions) and plan fiduciaries (loan defaults at 90 days arrear are a fiduciary breach).
- Dollar amounts of employee contributions by type and source
These analytics allow for a deep dive into appropriateness of participant behavior potentially impacting plan menu design decisions, employee investment assistance, Roth utilization, TDF utilization and more.
For assistance in analyzing your plan analytics, please contact your plan advisor.
A top concern for individuals nearing retirement is out-of-pocket health care costs. A recent survey revealed that 74 percent (of 1,316 U.S. adults aged 50 or older) admit that one of their top fears is out-of-control health care costs, and 64 percent are terrified of what health care costs may do to their retirement plans (up from 57 percent in 2015).¹
Although the fear is clearly real, there is something people can do mitigate future health care costs. Personal care and healthy lifestyle choices can reduce health care costs and increase retirement dollars.
Many organizations are initiating wellness programs to promote healthy living among their employees. These programs focus on employee engagement and correcting the health epidemics facing Americans today. Eighty-seven percent of the world’s workers are disengaged.² Additionally, sedentary office culture is being linked to lifestyle-related conditions such as diabetes and heart disease.³
A case study conducted by HealthyCapital follows a typical 45-year-old male (John) diagnosed with high blood pressure. The study showed that John will spend $1,591 more annually out of pocket today versus a healthy person. With a few simple lifestyle adjustments (exercising, limiting alcohol intake, choosing healthy fats and limiting dietary salt) he could save an average of $3,285 annually over his lifetime, extend life expectancy by three years and reduce his pre-retirement (age 50-64) health care costs by $65,697. If he invested his annual savings into a typical retirement portfolio, John could generate an additional $100,348 for retirement by age 65.⁴
Annual Out-of-Pocket Health Care Costs⁵
|Average||Well Managed||Reduction in Health Expenditures|
Moving from an average lifestyle to well-managed living is a clear win — not only does the well-managed people feel better, they also have additional income in both pre-retirement and retirement.
Encouraging employees to live a well-managed life through wellness programs is not only a benefit for employees, but employers as well through reduction in medical-related employee absence and increased productivity and morale.
To learn about implementing a wellness program for your employees, please contact your plan advisor.
¹Nationwide. “Healthcare Costs in Retirement Survey.” https://nationwidefinancial.com/media/pdf/NFM-16070AO.pdf
²Gallup. “The worldwide employee engagement crisis.”
³Harvard Health. “Too much sitting linked to heart disease, diabetes, premature death.”
⁴HeatlhyCapital. “Building Wealth Through Wellness.”
⁵HeatlhyCapital. “Building Wealth Through Wellness.”
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with Higginbotham.
The “Retirement Times” is published monthly by Retirement Plan Advisory Group’s marketing team. This material is intended for informational purposes only and should not be construed as legal advice and is not intended to replace the advice of a qualified attorney, tax adviser, investment professional or insurance agent. (c) 2018. Retirement Plan Advisory Group.