Not saving enough is not the sole culprit in today’s retirement readiness crisis, as many retirees don’t spend their retirement funds wisely because they don’t know how to make the right decisions to ensure the money will last.
With rising health care costs, long-term care, and uncertainty about inflation and taxes, employees need support to understand their financial needs. For example, some studies place health-care costs in retirement at $250,000 per couple above and beyond what Medicare covers. Because of these complex financial circumstances, employees need to be aware of what their “take-home” pay will be once they retire, and save enough to have a shot at maintaining their standard of living throughout retirement.
Income streams in retirement often come from multiple sources, such as Social Security, personal savings and benefits provided from their current and previous jobs that may include pension and/or additional 401(k)/403(b) plans. Retirement planning therefore requires a bit of number crunching and access to tools and resources that will help your employees determine their income and anticipated expenses in retirement and, therefore, what financial vehicles are most efficient to get there, rather than simply focusing on how much they have saved.
This series continues in Part 4, with a look at the need to give employees the right context for using the tools and information you provide.
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