What is the state of your finances? How much, if any, are you saving? What is your plan for retirement? What does retirement look like for you? How much will it take to finance your dreams? For some, these questions might be conversational gold. But for many, this topic can induce a lot of anxiety.
April is Financial Literacy Month, which highlights the importance of reviewing your finances and learning more about how you can improve your financial situation, no matter where you’re at. One critical piece of everyone’s financial situation is a retirement plan. Are you saving? Are you one of the lucky ones who still get a pension? Or maybe you’re relying on the hope that Social Security be enough? Do you plan on working until you’re 85?
Let’s take a look at the state of retirement planning in the U.S. and what options employers have for establishing plans to help.
The Retirement Crisis
Search for information on the retirement crisis in America and you’re sure to get a plethora of articles detailing how most Americans aren’t saving enough, if at all, for retirement.
According to a 2021 report from the Federal Reserve, one-fourth of adults do not have any retirement savings. Of those that did have money saved, only 36% think their savings is on track for a sufficient and timely retirement. A recent Forbes article also claims that nearly half of Americans don’t have enough money to maintain their standard of living once they retire.
So what do we do?
So, while we know there’s a problem, what do we do? How do we solve it? How do we help people save? While it’s not easy, it’s not impossible, either. In fact, studies show that Americans are much more likely to save if a retirement plan is offered through their employer. That has been the driving force of numerous U.S. states taking matters into their own hands by proposing and passing mandatory retirement plan programs. In these situations, employers must either enroll into a state-sponsored plan or establish a plan themselves.
Retirement Plans: Benefits galore!
How can employers help? By choosing to sponsor a retirement plan, employers can enjoy several benefits, including reduced taxes, employee retention, and the opportunity to save more for the future (and allow their employees to do so, too!). The level of tax-savings and contributions available depend on the type of plan established, but can vary greatly based on the employers’ business and profitability patterns. That’s where we come in.
At EGPS, we work with employers to determine the best plan type that will meet their unique goals. For example, businesses with high profitability patterns (doctors, attorneys, etc.) might be great candidates for a cash balance plan. Businesses who wish to allow high earners to save as much as they can without regard to lower earners’ savings might want to consider a safe harbor 401(k) plan. At EGPS, we’re ready to ask the right questions and explain the best options for them, based on their specific objectives.
Why it matters
When it comes to financial planning for retirement, experts recommend various mediums – including a specific retirement plan contribution, personal savings, and Social Security. Yet those without access to an employer-sponsored plan are much less likely to have retirement savings at all. Only 27% of Americans without access to a company retirement plan have money saved for retirement (source), and according to the AARP, workers are 15 times more likely to save for retirement if their workplace offers a retirement plan (source).
So, by establishing a retirement plan, employers can enjoy tax benefits and employee retention/satisfaction, along with helping their valued employees save for their goals and dreams. And if that doesn’t make you feel warm and fuzzy, what will? 😊
Want more information?
Interested in learning about the options employers have for their retirement plans? Fill out the form below, and we’ll reach out with more information on various plan types.