In the world of employee benefits, it’s never a good thing to lag behind. Favorable employee benefits attract new talent, keep current talent happy, and most importantly, actually provide useful benefits. According to the Bureau of Labor Statistics, employee benefits account for 31.7% of employee compensation. 31.7%. Imagine getting 31.7% more pay. Well, imagine it for a second and then remember how much healthcare costs by itself, and probably be thankful.
Companies such as Google, UPS, Auroa, and Froedtert all provide retirement plans for their employees. Whether it’s a 403(b) or a 401(k), it doesn’t make a difference, they provide this benefit as a way to encourage their employees to save for retirement. Gone (or mostly gone) are the pensions that your grandparents had. It’s now up to the individual to determine what their financial future looks like, and to most that’s a very scary thought.
We find that a lot of people who utilize employer sponsored plans know that they should be putting money away for retirement, do, but really don’t know or think about how it’s invested. I hope that if you’re taking the time to read this article you are one of these people and are looking for a better way to invest your assets. Unfortunately, most people fall into the category of not even contributing to the plan offered…
As of 2012, just 31% of millennials (1981-1997), 50% of Gen Xers, and 56% of baby boomers participated in their company’s plan. Source: PEW analysis of 2012 Census Bureau Survey of Income and Program Participation data. Those numbers baffle me.
If you’re reading this article, +1 for you for either starting or continuing to think about this stuff.
Okay, so you’re one of the few that are in. You’ve been investing, keeping slight tabs on the growth, and you might even talk about it with your co-workers around the water cooler to compare when things are going well. You know enough to be dangerous, but you may be beginning to question whether or not these dollars are being used in the most efficient manner.
A typical retirement plan offers you a few choices - in this plan you most likely have a platform of 10-20 different mutual funds and likely they are not all of the best funds out there. Of those handful of funds up to half of them could be target date retirement funds that display a year in which you might be at retirement age, for example, the Vanguard 2045 fund.
Funds like these consider age and well… age. It's assuming your risk tolerance based on your age alone, not based on how you actually view risk, what your goals are for these retirement dollars, and so on.
We’re going south right?
An analogy that I like to use with my clients is if we were to get in a car today and we’re looking to drive to Florida (most of the time this conversation occurs in Wisconsin), you could get there eventually by just heading south and following some signs. But would that really be the most efficient way to get there? Probably not. Most people just hop in their cars, fire up Maps and let Desiree, or Sasha, or whatever they named their GPS voice, lead them to their destination, accounting for traffic, construction, and other delays. I even know some people that use Maps for routine trips just to make sure they are using the most efficient route (my wife).
Now I hope you see where I am going with this. It may not be enough to just set your retirement plan on autopilot and hope it gets you to where you’re looking to go without accounting for changes in the route. For most, their employer sponsored retirement plan is where they have most of their assets. For the majority of employees, they may only be able to use those 10-20 choices that we mentioned earlier, but for those others, who are fortunate enough to have a "brokerage window" option built into their account, it almost becomes endless.
What are you really saying?
What I am really saying is that employees of these companies (Google, UPS, Froedtert, Aurora, and others) have a built-in advantage to their retirement accounts that they may not even be aware of. Thousands of companies, and more every day, are adding brokerage windows to their plans which allows for the individual to invest using thousands of funds and as they see fit OR to hire a fiduciary (a person or organization that is bound legally and ethically to act in the other’s best interest) to help them professionally manage those assets.
Adding brokerage windows to retirement plans is becoming more and more common in the employer sponsored retirement space. It’s a great option for someone looking to receive professional assistance with their largest retirement asset.
financial advisor, economics junkie, sports fanatic
"Money is tough, it's something that we all use on a daily basis, yet it doesn’t ever come with instructions. If you have questions, reach out to me or someone else at Fischer Wealth Management so we can help you achieve what matters."