Current Thinking

A To-Do List for Retirement Planning This Year

The uncertain times we have been living in for the past year-plus may – and I emphasize “may” – finally be on the decline.

While we are plainly not out of the woods yet, I believe the time has come to at least consider, if not act upon, five retirement-related “to-do” items for this year.

Focus on saving money for retirement. This is of course a long-lived mantra, yet according to a CNBC report in February, roughly 25% of workers in the U.S. have less than $10,000 saved for retirement.

Obviously, COVID-19 did not help the situation. Through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the federal government offered a variety of lifelines to struggling Americans, including waiving the 10% tax penalty for early distributions from IRAs, 401(k), 403(b), and 457(b) plans (under certain circumstances), and increasing the maximum amount of a 401(k) loan to the lesser of $100,000 or 100% of the participant’s vested assets.

We had no argument with that approach; after all, many people – through reduced hours or even job loss — needed sources of income and they needed them immediately.

And, to be sure, the nation is still facing a dramatic economic crisis, as evidenced by the recent passing of the $1.9 trillion American Rescue Plan (ARP) Act of 2021.

Even so, as vaccinations nationwide increase and COVID cases decline, it may be time to consider putting one’s retirement savings strategy back on its feet. A trusted professional can certainly help to navigate the unprecedented waters we all are facing.

Stay informed about legislative developments. CARES and ARP may be headline-makers, but their potential effects on retirement savings are not always spelled out by the mainstream media. In addition, the U.S. Department of Labor (DOL) and the Internal Revenue Service (IRS) frequently issue updates and guidance on a wide range of regulations – moves that, again, are not always widely reported. A reputable adviser with a track record of monitoring such activities can be of immeasurable value here.

Consider outsourcing fiduciary responsibility. This is another tip that we regularly share, but it bears repeating as we (hopefully) start returning to “normalcy.” Outsourcing fiduciary responsibility to a dependable, proven company can free up time and help protect both plan sponsors and their organizations from litigation.

Keep in mind other sources of retirement income. Besides 401(k) plans and IRAs, defined benefit (pension) plans, employee stock-ownership plans, and of course Social Security should all be factored into participants’ calculations of what they can expect their golden-years income to be – and what they can do to adjust that expected income now.

Look at ways to improve retirement outcomes. Related to the above point, the DOL has issued an interim rule that will require plan administrators to issue annual statements to participants illustrating how much income they can expect from their ERISA-governed retirement account, as a single life annuity, as well as via a qualified joint and survivor annuity that includes a survivor benefit.

The sums that appear on the statements can then be divided to see what the participant’s annual monthly income could look like.

The idea behind those annual statements is to afford participants the opportunity of estimating what their lifetime retirement incomes could be, with the byproduct being to encourage those participants to re-examine, and possibly reconfigure, what they are putting into their retirement savings fund(s) to allow them a comfortable retirement.

Questions that should follow are determining what parts of the sum are secure, reliable and will be available on a regular, ongoing basis (Social Security, pension, etc.) and how much is not (stocks, etc.).

There are – and will be – more issues to consider as the year unfolds, especially as the COVID situation develops and as the Biden administration continues to sort through an ever-changing array of priorities. But these five points should serve as a solid start for plan advisers, sponsors, and participants alike.

About the Author

Richard Rausser

Richard W. Rausser has more than 30 years of experience in the retirement benefits industry. He is Senior Vice President of Client Services at Pentegra, a leading provider of retirement plan and  fiduciary outsourcing to organizations nationwide. Rausser oversees consulting, BOLI and non-qualified business development and actuarial service practice groups at Pentegra. He is a frequent speaker on retirement benefit topics; a Certified Pension Consultant (CPC); a Qualified Pension Administrator (QPA); a Qualified 401(k) Administrator (QKA); and a member of the American Society of Pension Professionals and Actuaries (ASPPA). He holds an M.B.A. in Finance from Fairleigh Dickinson University and a B.A. in Economics and Business Administration from Ursinus College.