Hard Work ≠ Enjoyable Retirement

Hard work can lead to great success.  As a child, I remember asking my mother on numerous occasions, as she got into the car to go to work, “Where’s Dad?”   She would reply “Working overtime.” My parents routinely worked 50, 60 and 70 plus hours each week.  My family represents what I like to refer to as the “Soul of America” which some refer to as the Middle Class.  It is this middle class that keeps the wheels of the world moving forward.  Unfortunately, this group of people may suffer the most during their retirement years because they are not saving enough on their own.  Despite all of their accomplishments fueled by dedication and hard work, saving for retirement will not be one of them.

Hard Hat Eddie

Offering a 401(k) plan was all the hype in the early 80’s as employers started to include them as part of their benefit packages.  Companies then started adding an employer match to further entice participants to contribute to the 401(k) plan.  Although these are commendable efforts, they do not necessarily have a big enough impact on retirement savings.  Couple that with the decline of Defined Benefit plans being offered; now is a perfect time to review the goals of your 401(k) plan to ensure it is designed to drive Retirement Readiness. Review additional details on plan design features that can help you achieve this goal.

There are many business decisions that will be taken into consideration when assessing your retirement plan.  Here is a great question to start with which encompasses a lot of your business objectives:

Do you have an orderly exit plan for your employees?

Having a strategy around your employees being able to retire on time will help you manage everything from cost savings to higher morale:What is the increased healthcare cost if employees continue working through retirement:

    • What is the increased healthcare cost if employees continue working through retirement?
    • Do you risk the chance of losing your next generation of employees if there is no room for advancement?
    • Is morale and performance affected because employees are working longer than they want to?
    • Do you see a decrease in innovation?

My mother, who works as an emergency room nurse, is capable of making split second life-saving decisions, but regardless of the education she received about saving for retirement, she didn’t start early enough.  My father, a mechanic, is capable of fixing anything from jet engines to lawn mowers. Against my mother’s many wishes he still owns every vehicle he has ever purchased which all exceed 200k miles! He recently told me he always thought he had enough time to save for retirement.  My parents have worked hard their entire lives and have many great accomplishments to show for it.  The one I believe my mom is most proud of is watching all four of her children graduate from college. We made it difficult on her; all four of us went to a different college!

It is unfortunate that the calluses you earn from long, hard and stressful nights of work do not translate into retirement savings. My parents would have questioned whether or not they could have made ends meet with having 10 percent deducted from their paychecks for retirement.  However, I have no doubt they would have found a way to make it work and today they would be grateful they did. Despite the fact that my three siblings are educated individuals who make sound decisions every day, even they are at risk of not saving enough for retirement. Plan sponsors should consider evaluating the effectiveness of their retirement program to help make sure the “soul” of their company can enjoy retirement.

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Affiliation Disclosures

While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that none of the member companies of The Principal are rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.

Insurance products and plan administrative services are provided by Principal Life Insurance Company a member of the Principal Financial Group® (The Principal®), Des Moines, IA 50392.

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