As the retirement landscape continues to evolve, those thinking of retirement whatever generation, Baby Boomers, Generation X, or Millennials will face different challenges. However, there are some things all of us can do to prepare for retirement. These are fundamentally common to all generations. In the 15th Annual Transamerica Retirement Survey, there are tips for workers and employers on how to prepare for retirement. The following is taken from the report:
Seven tips for workers toward achieving retirement readiness:
1. Save for retirement. Start saving as early as possible and save consistently over time. Avoid taking loans and early withdrawals from retirement accounts.
2. Consider retirement benefits as part of total compensation. Ask your employer for a plan if they don’t offer one.
3. Participate in employer-sponsored retirement plans, if available. Take full advantage of matching employer contributions, and defer as much as possible. If not offered a plan, consider contributing to an IRA or the U.S. Department of Treasury’s my RA.
4. Calculate retirement savings needs, develop a retirement strategy, and write it down. Factor in living expenses, healthcare needs, government benefits and long-term care. Envision future retirement and have a backup plan in case retirement comes early due to an unforeseen circumstance. Seek assistance from a professional financial advisor, if needed.
5. Get educated about retirement investing. Whether relying on the expertise of professional advisors or taking a more do-it-yourself approach, gain the knowledge to ask questions and make informed decisions. Also learn about Social Security and government benefits.
6. Take advantage of the Saver’s Credit. Check if you qualify for this tax credit available to eligible tax filers who contribute to a 401(k) or similar plan, IRA or my RA. If you age 50 or older, make catch-up contributions, if available in your plan or through an IRA.
7. Be proactive to help ensure continued employment even in retirement. Take proactive steps to stay employed and maximize opportunities by keeping job skills up to date, staying current on employment trends and marketplace needs, and even going back to school to learn new skills.
Recommendations for Employers
Working with their retirement plan professionals and providers, employers can help improve their workers’ retirement outlook through these opportunities:
1. Offer a retirement plan along with other health & welfare benefits if not already in place. Take advantage of the tax credit available for starting a plan.
2. For employers that offer a plan, extend eligibility to part-time workers. Seek expertise of retirement specialists familiar with plan design on how to best accomplish this.
3. Proactively encourage participation in existing retirement plans. Consider adding automatic enrollment and automatic escalation features to increase participation rates and salary deferral rates.
4. Discourage loans and withdrawals from retirement accounts. Limit the number of loans available in the plan. Ensure participants are educated about the ramifications of taking loans and early withdrawals. Allow for an extended loan repayment time for terminated participants.
5. Consider structuring matching contribution formulas to promote higher salary deferrals (e.g., instead of matching 100 percent of the first three percent of deferrals, change the match to 50 percent of the first six percent of deferrals or even 25 percent of the first 12 percent of deferrals).
6. Ensure educational offerings are easy to understand and meet the needs of employees. Provide education on calculating a retirement savings goal, principles of saving and investing, and, for those nearing retirement, ways to generate retirement income and savings to last throughout his/her lifetime.
7. Offer pre-retirees greater levels of assistance in planning their transition into retirement–including education about distribution options, retirement income strategies, and the need for a backup plan if forced into retirement sooner than expected (e.g. health issues, job loss, family obligations).
8. Create opportunities for workers to phase into retirement by allowing for a transition from full-time to part-time and/or working in different capacities.
9. Promote incentives to save, including the Saver’s Credit and catch-up contributions.
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