Retirement Plan Calculations Can Boost Savings and Retirement Comfort

Saving is essential for your plan participants’ comfortable retirement. But how can you get them to boost their savings to reach their retirement goals? Smart Investor suggests you encourage them to calculate their retirement needs. Individuals who perform calculations tend to aim for higher savings, according to “The 2012 Retirement Confidence Survey: Job Insecurity, Debt Weigh on Retirement Confidence, Savings,” Issue Brief (March 2012) published by the Employee Benefit Research Institute (EBRI).

Retirement Savings: Off-the-cuff Estimates vs. Systematic Calculations

Many individuals don’t take a systematic approach to figuring how much they’ll need for retirement. In fact, 42% of workers guessed at the numbers, according to EBRI research. EBRI figures this is why so many workers underestimate their retirement needs.

In contrast, workers who’ve run the numbers have higher savings goals. For example, according to EBRI, “Twenty-two percent of workers who have done a calculation, compared with 9 percent of those who have not, estimate they need to accumulate at least $1 million for retirement.”This is a significant difference.

Encourage your employees to calculate their retirement needs. You can do this by reminding them of the online retirement calculators available at no cost as part of your 401(k) plan.

If your plan doesn’t offer a retirement calculator, perhaps it’s time to reconsider your providers. Meanwhile, you can point employees to free calculators available to the general public. One example is T. Rowe Price’s Retirement Income Calculator.

What About Your Retirement?

If you’re too busy to calculate your retirement income needs, you’re not alone. That’s why Smart Investor offers retirement planning to individuals in addition to advising corporate defined contribution plans.

Looking for a registered investment advisor serving Sacramento, Roseville, and Stockton, CA? Smart Investor serves all three cities from our base in Rocklin, CA. Contact us at 916-435-2100.