Planning for retirement in 2017

glasses and calendar

Welcome to 2017. I am going to resist the urge to write the obligatory New Year’s resolution post (I admit I have done it in the past).  It isn’t because I am anti-resolution, I just don’t think they work for most people.

It’s not like the vast majority of people don’t know how to turn the calendar to a new year (for those that still actually use a paper calendar). It’s simply that the earth’s completion of a trip around the sun doesn’t change the fact that it is typically all about us.  And we, collectively, don’t like to change.

This is certainly true in planning for retirement. Deciding to save more, and then actually doing it, is a difficult choice to make.  Many employers help their employees make these decisions with plan design features such as auto enroll, auto escalate, and qualified default investment alternative (QDIA) transitions.

Some companies go even further by creating Employee Stock Ownership Plans (ESOPs). ESOPs are qualified defined contribution retirement plans that are invested primarily in the common stock of the sponsoring company.  ESOPs are typically added in addition to a 401(k) plan, providing supplemental retirement savings.

But the addition of another retirement plan does not necessarily mean more decision making for employees. Most ESOP owned companies provide the additional benefit at no cost to the employee so there is no need to make a decision about how much to contribute.  As the ESOP contributions are typically invested primarily in common stock of the company there are no initial investment decisions for the employee to make.

There is no one size fits all strategy for helping employees be prepared for retirement. But ESOPs can go a long way for some companies to help their employees achieve their long term financial goals.

In addition to blogging here, I also tweet regularly about topics of interest to ESOPs. Follow @twitter 

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This document is intended to be educational in nature and is not intended to be taken as a recommendation.

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

t17010907eu – 1/2017