Encouraging Employees to Save for Retirement Jack Riley CPA, Investment Advisor Representative September 21, 2017

Meet Average Joe Employee 42 years old Earns $57,000 per year Contributes 5.1% to 401(k) retirement plan – employer match is 1.7% Has $43,000 saved in IRA and 401(k) Portfolio gains average 5-6% annually Average health – NO HIGH RISK ISSUES No Long-Term Care Insurance coverage Joe wants to retire at age 65 Life Expectancy is 90 – good genes and in good health Estimated health care costs of $5,140 at age 65 with Medicare Coverage A, B and D Joe wants the post-retirement distributions to replace his disposable income Source: Retirement Insights – NO ONE IS AVERAGE. Published by J.P. Morgan

Employer Considerations Move beyond managing by considering averages – consider range of participants’ savings and investing behavior. E.G. an increase in the plan’s average contribution rate may be driven by just a few in which case the median would be a better indicator. If a number of participants drop off annually review the features and performance. Review participant allocations for appropriate diversification. Consider automatic enrollment and automatic contribution escalation with pay raises. Consider if the plan offers a variety of choices in addition to the qualified default investment alternative (QDIA) – normally a Target Date Fund.

Employer Considerations Understand the disadvantages of Target Date Funds: One size does not fit all – No consideration for Risk Tolerance, Health etc. As a Fund of Funds underlying expense ratio may be high – more than one fund charging fees. Lack of diversification is underlying funds all in same family may have similar investment style. Targeted to retirement age mandates most conservative portfolios when growth may be important considering a twenty year remaining life.

Questions and Answers Contact Information: jack@fmiardmore.com 580-226-4058