No matter your opinion on who's to blame for the current financial crisis, the pending bailout legislation and which of the two presidential candidates can best lead us out of this economic turmoil, there is one issue I believe we all can agree on: We need to protect our retirement savings.
Six ways to quash 401(k) anxieties over the financial crisis
Lynn Unsworth, regional manager of Capital Associated Industries, offers a few tips to help employers ease workers' concerns about their 401(k) balances in light of the recent mood swings of the stock market.
1. Don't give employees financial advice. Employers can give workers the resources they need to make decisions, but don't give advice on selecting stocks and where to invest money.
2. Educate employees on their options. Let workers know that there are restrictions and penalties for early withdrawals on a 401(k) account. Employees need to be educated on the mechanics of their plan.
3. Bring in investment advisors to meet with employees. Companies should enlist their plan vendor to work with employees on their individual investment strategies
4. Help employees avoid looking at their 401(k) performance every day. Employers need to reinforce to employees that a 401(k) is a long-term investment and help them understand they are investing for retirement.
5. Release a benefits statement to all your employees. Employees often underestimate the value in their hidden paycheck.
6. Reassure employees that their money is safeguarded. Employers should make sure their employees know their 401(k) is audited and heavily regulated by the Department of Labor and the Internal Revenue Service. Employees need to be reassured the money they are investing is segregated from the company's general operating funds.
Listen to our conversation with Unsworth to hear her elaborate on each of these suggestions.
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Saving for retirement is about the long term
Most people who have self-directed [retirement] plans need to look at the long term, says Jan Grude, president and executive managing director at Buck Consultants. "The current state of financial markets is no indication of the future state of the financial markets."
Markets have shown themselves extremely resilient. They rise and they fall - and rise and fall again, Grude explains. You don't want some company leader somehow communicating that they are responsible for ensuring the returns and financial health of their employees' portable retirement plan.
The employer has chosen portability, and the employees have elected portability, which means essentially employees end up shouldering the risk, Grude asserts. Comforting words are useful, but employers should be careful about assuming responsibility for market declines, in the same way they shouldn't take credit for market booms.
If defined contribution plans have in fact been subjected to the downturn in the market, and a large portion of people's net worth on retirement assets has been wiped out, then we will see an increased demand for retirement benefits that provide a higher level of security, Grude adds. "We are also going to have greater demand for employers to provide financial education for their staff as part of a total reward strategy."
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Workers crave for financial advice
Troubles in the nation's economy may mean more employers will start to offer a financial advice program as part of their work-life benefits, suggests a survey by Workplace Options, a provider of HR services.
In a national survey conducted on Sept. 21 and Sept. 22, which polled 711 adults, 48% of respondents said that they are stressed out over the current state of the economy, and it's affecting their workplace productivity.
While the majority of respondents report that their employers offer no financial advice program, 39% said it is very important for companies to offer such services, with 57% saying they would take advantage of the services.
"Financial problems affect emotional and physical health, and ultimately trickle down to the workplace, where employees must juggle these worries with hectic schedules and deliverables," says Dean Debnam, chief executive officer for WPO. "Because of the current economic pressures, employers are recognizing the value of financial consultation services to protect their own bottom line," he adds.
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Market chaos may affect women's retirement outlook
Women may have to rethink their retirement savings strategies due to the shake up in the U.S. banking system and its affect on the stock market, reports the Web site Women's enews.com.
While women's participation in retirement plans has risen considerably relative to men in recent years, they traditionally have been conservative investors. Their accounts are smaller, compared to men's. Consequently, a sudden and huge loss to the account is a major setback in building an adequate retirement nest egg, according to the online magazine. Data on 2007 balances in defined contribution plans shows that women on average hold $19,749 in their accounts, while the mean for men is $32,391.
Alicia Munnell, director of the Center for Retirement Research at Boston College, told Women's enews.com that recent financial crisis will cause many women to reevaluate their retirement plans and strategies. Some women may have to work longer than they had expected to recoup their losses in the stock market, she added.
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