A Map and Directions
“When it comes to retirement planning, the U.S. workforce needs both a map and directions – but employees should recognize that they do not have to be alone in their journey towards a secure retirement,” said Robert E. Sollmann, executive vice president, Retirement Products, at MetLife. “A trained financial professional, an HR representative and online tools are all good resources to consider for guidance.” More than half of study respondents expressed concern about having a steady income in retirement, and Sollmann pointed out the importance of determining how much retirement income will be needed to cover essential expenses, such as housing, food and transportation.
Because they don’t have a handle on their financial needs in retirement, many employees feel unprepared and unsure about their savings efforts – more than half (52%) are behind where they had hoped to be in building up retirement savings. The same percentage is concerned about outliving their retirement money, and even more (54%) are worried about having enough steady income during retirement to cover costs of medical insurance and/or out of pocket medical costs.
Employers Can Help
“There are additional ways employers can help employees,” noted Michael K. Farrell, executive vice president, Distribution, for MetLife. “Almost half of employees are interested in their employer automatically enrolling them in a savings program, such as a 401(k), 403(b) or 457. Over 60% believes it would be very helpful if their organization provided a statement that shows how much income the employee’s savings would provide in retirement, and 45% would like their employer to offer an annuity as part of their 401(k) or similar plan. Offerings at work such as these can have a strong influence on employees’ preparedness for retirement.”
Following are tips for employees and others who want to take a closer look at their retirement plan and make sure it’s on course:
- Focus on making saving a simple and achievable goal
Through the first two decades of your working life, make every effort to save the maximum allowed by a 401(k) plan, but be sure to at least set aside enough to get the employer matching contribution. If already making the maximum contribution, consider funding an individual after-tax IRA. If you change jobs, consider rolling your existing 401(k) into your new plan if the plan allows it or into a traditional IRA and not taking a lump sum distribution – lots of younger workers make this mistake.
- Take steps to create reliable income
There is no magic number, but 60% of pre-retirement income before tax is a good starting point for reliable income to cover essential expenses in retirement. Social Security and pensions are great sources of dependable income, but most people will need more stable, lifelong income. There are simple, small steps you can take. Start protecting your future income by putting a portion of your savings into an annuity with income guarantees and adding to it over time, or purchase an income annuity when you retire to cover any remaining expense gaps.
- Look for ways to save that give you access to cash but also give you growth
Having cash on hand for the unexpected is smart. There could be an unexpected expense, such as a health need, a job loss or a change to your income – perhaps from an earlier than planned retirement date. But keeping too much cash in the bank earning little interest can be detrimental to your retirement savings. There are a number of financial products that can let you access some cash when it’s needed and still keep your money working hard for you. Speak with a financial services professional who can suggest solutions to help meet your needs.
