The retirement readiness of Americans is bleak. A 2015 Federal Reserve Report found that thirty one percent of non-retirees have little to no retirement savings. In that report, half of the non-retirees were not confident at all or had no confidence in their ability to choose investments. Furthermore, the average American has only twenty thousand dollars saved for retirement. Therefore, most Americans will simply not be able to afford retirement.
The factors contributing to the lack of savings is lack of education, absence of workplace plans (one third of all companies do not offer a workplace savings plan), and frequent distributions from retirement accounts (raiding their accounts to pay for other expenses).
Unfortunately, the same circumstances plague the trucking industry. A recent poll found that most drivers have no retirement savings and only fourteen percent of drivers polled listed their retirement savings as a top priority. With so little saved, these drivers will not be able to retire. Here’s the math. According to Indeed, the average truck driver’s annual income is $80,970. The largest annual Social Security income is $40,140. The shortfall of $40,830 will have to be met by an account balance of over one million dollars.
For late saver Baby Boomers, the hurdle to have that cool million is out of reach. However, trucking firms do have the unique opportunity to introduce and encourage their younger drivers and other non-driver employees to take retirement savings seriously. By starting a new workplace retirement savings plan, the company will see many benefits. These benefits include tax credits for the first three years for committing to a plan, tax deductions, better employee retention, and a boost in morale. In addition, the firm owners might be looking for a way to build up their own retirement accounts, too.
When a firm is starting up their retirement savings plan, the firm must have a well formulated game plan for the plan to be successful. The game plan is commonly expressed in a document called The Employer Policy Statement. The Employer Policy Statement (EPS) is written by the firm, investment advisor, or other fiduciary. It should be written in plain English, explain why the plan is in existence, it should include quantifiable plan success metrics, and other important information that pertains to the plan.
After the firm completes the EPS, the plan must be distributed to the eligible employees. If applicable, opt in for automatic enrollment and savings escalation. These two things cut down on low participation rates and low savings rates by employees. In addition, it can save an enormous amount of time on enrolling newly eligible employee paperwork and initial enrollment paperwork. After enrollment, the firm should make a concerted effort to offer helpful and unbiased advising services from a qualified advisor.
Normally, the plan runs smoothly and there are not any major issues. Following are some common mistakes that can be easily avoided. First off, do not contact “your guy” – many good financial advisors will list all their services as holistic and gladly take on your plan. A firm should interview a plan advisor and ask the following questions. Do they have an annual quota? If yes, run. Their compensation is based on new sales. Once they complete the sales, they will be forced to focus their efforts on the next sale. Do they have a Series 66 license or just the Series 6? If they have the 66, they will be able to give your firm’s employee objective investment advice. If they have the 6, then they are just commission based sales representatives. How many plans are they the broker of record on? If fewer than five, then workplace savings is not a very significant component of their business. Lastly, what will be their process for implementing and monitoring your plan?
Here are a few more common mistakes you don’t want to make. Avoid the “set and forget” approach. If the firm does not make a serious effort to meet with plan fiduciaries and discuss plan benchmarks, investments, or plan service providers, its chances of success are less. Not opting for fiduciary services, automatic plans, or mailing services would be a mistake, as well. While these services may seem like the cup holders and seat warmers for a plan, they are highly effective in cutting down the administrative burden that is assumed by the firm.
Starting a new workplace savings plan is easy and can really make a big difference in your overall employee satisfaction, retention, and your people’s future financial security. If you have any questions about this or other financial matters, I can be reached at (903) 658-3809 or email@example.com. I am an independent financial advisor located in Houston, Texas, and would love to help you with starting your company’s new workplace savings plan.