Thanksgiving, Black Friday and a Retirement Strategy

‘Tis the season.

The planning is under way. To be honest, the planning started long before now. It actually started around the same time the department stores started decorating for the holidays which seemed to begin just after Labor Day this year. I don’t remember how it got started but for the past several years it has become a tradition in our family to wake up well before dawn the day after Thanksgiving and get to the mall in an attempt to find the one special item on our list that would’ve likely been gone if we had remained in bed a couple extra hours that morning.

Black Friday shopping has become a tradition for many families. According to a survey from the National Retail Federation, 141 million people shopped and spent more than $57 billion during the four-day holiday weekend last year. The planning starts well before Thanksgiving arrives as retailers and online merchants begin sending ads for the holidays earlier each year in an attempt to build excitement for this annual event. Many retailers have taken this a step further in an attempt to get a jump-start on holiday sales by beginning sales on the eve of Black Friday. For many, it seems to be working.

It also takes careful planning on behalf of plan sponsors to make sure that employees are properly prepared for retirement and a retirement strategy can help. Employers can face big hurdles in making sure that their employees are financially prepared for retirement. Unfortunately, many employers have not taken the time to develop an effective plan design strategy and communicate that strategy to their employees.

Developing a strategy

An effective plan design strategy should begin by determining the level of benefit you’d like to provide your employees once they reach retirement age. This goal will be different for each employer but many will attempt to target a benefit replacement of 60 – 80% of an employee’s pre-retirement income. After the benefit level has been targeted, it’s easier to design (or re-design) your plan in a way that can help you meet these objectives. A plan design that rewards employees for making contributions to the plan on their own behalf can be very effective at reaching the desired income replacement levels.

After determining the level of benefit you wish to provide and coming up with a plan design strategy, it’s important to communicate these goals to your employees. Communicating these goals to your employees can help with employee engagement to encourage them to take more accountability for their own retirement. The communications can come in many different forms including enrollment meetings, one on one meetings and written materials. Consistent communication provided by their employer works toward building employee appreciation

Finally, to help ensure that goals remain on track, it’s important to measure the goals annually. If you determine that employees appear to be falling short on where they need to be for retirement, take action. This may be as simple as stretching employer contributions under the plan which helps encourage employees to make additional contributions under the plan in order to receive the same level of employer contribution.

Have you taken the time to create a plan design strategy that works for your company? Have you seen the level of engagement among your employees increase? Please share.

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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.

© 2014 Principal Financial Services, Inc

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