Retirement Watch

Advice for building retirement plans based on the number of years until retirement

Sponsors can give plan participants flexible tips and tools

Feb 14, 2016 @ 12:01 am

By Fredrik Axsater

Plan participants looking ahead to their lives in retirement can take a cue from recent retirees. It's not surprising that baby boomers are free spirits — the sentiments this generation held about life when they were in their teens and 20s during the 1960s have carried through to their perspectives on retirement as well.

When it comes right down to it, most participants see a bright future ahead.

To ensure that participants of all ages achieve their goals, plan sponsors can offer flexible tips and tools to help them plan along the way.


Helping participants anticipate life in retirement is the first step toward retirement planning. The sooner employees start planning, the greater their chances are of achieving retirement readiness.

Participants want help from their employers. According to the January 2013 State Street Global Advisors DC Investor Study, 50% of participants are asking plan sponsors for help with retirement planning — including Social Security strategies and health care cost management — at least five years before retirement.

Consider implementing a program that provides planning strategies and worksheets at critical touch points along the way, starting at least 15 years out.

Following are key actions based on how many years your clients are away from retirement.

Fifteen years or more: Participants who are more than a decade away from retirement are juggling multiple priorities, such as helping their children pay for college and assisting elderly parents, in addition to managing their own finances.

Encourage them to start imagining what retirement will look like. Set a savings goal based on how much income they will need to live comfortably and develop a plan to reach that goal. Take advantage of defined contribution plan options, such as a company match or auto-escalation. Make retirement savings a priority among other financial goals. Put bonuses, tax refunds and other windfalls toward retirement.

Ten years: With just a decade of full-time work ahead of them, participants must put extra effort into accumulation. At the same time, they can complete a few specific tasks to prepare for the logistics of life — and income — in retirement.

Encourage them to make catch-up contributions to retirement accounts (also a good idea for participants as young as 50). Take advantage of individual retirement accounts in addition to saving in a defined contribution plan. Combine multiple retirement accounts to reduce fees and make it easier to manage investments. Develop a plan to be debt-free by retirement. Research and potentially purchase long-term health care insurance.

Five years: Participants should assess what they have saved and determine how much they still need. Employer support is critical at this juncture, when there is still time to adjust savings and income plans.

Encourage participants to revisit and update their vision for retirement. Review DC plan retirement benefits, as well as any relevant deadlines for claiming them. Consider when to claim Social Security. Develop a retirement income plan, which may include Social Security, employer pension income from part-time work, and withdrawals from DC account assets or annuities. Reassess when to retire and whether this is a point-in-time decision, or if they wish to continue working part-time (possibly through employer-sponsored programs, such as work-sharing initiatives). Research and potentially purchase supplemental Medicare insurance.

Six months: With retirement right around the corner, participants can finalize the last few details of their income strategy. In this busy period, plan sponsors can help employees prioritize their to-do lists and ensure that they are ready for the next phase of their lives.

Encourage participants to: finalize a retirement income plan; make a final decision about when to claim Social Security; and decide whether to keep 401(k) funds in an employer plan or roll them into an IRA. They should have a withdrawal strategy for savings; investigate required-minimum-distribution rules; and develop a retirement budget.

Fredrik Axsater is global head of defined contribution at State Street Global Advisors.


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