Financial Planning Articles

Attracting and Keeping Great Talent with Your Benefits Package

The strong jobs market and record unemployment have made it increasingly more difficult to attract and retain valuable employees; however, a strong benefits package including services like financial planning is a great way to keep your talent pool strong. Offering employees top-tier benefits can make or break a job offer or be the difference between keeping your company’s MVP or not. As financial advisors and CERTIFIED FINANCIAL PLANNER™ professionals, our job is to help our clients understand their workplace benefits and incorporate them into their financial plans. We see a lot of different benefits packages and have some insight into what benefits are nice to have and which are becoming must-haves. Here are our thoughts on what elevates a good benefits package to a great one:

  • Paid Time Off
    • This seemingly standard benefit can play a major role in the decision-making process when choosing between two jobs. Tacking on a few extra vacation days may just sweeten the pot enough to attract greater talent. 
       
  • Paid Parental Leave
    • We are increasingly seeing paid maternity/paternity leave factor into our clients’ decision to stay with their current employer or to jump ship. Word that an employer is providing both new moms and dads with a little extra time to bond with their newborn spreads fast and may even improve employee’s mental health, which can lead to increased productivity.
       
  • Health Insurance
    • Healthcare costs have soared over the past few years, making this one of the most expensive benefits to administer for employers. That’s often made employer-provided health insurance a major sticking point in people’s employment decisions, particularly when kids are factored into the equation. Top-tier health insurance benefits not only help to attract and retain talent, but also help your employees stay healthy and keep working.
       
  • Long-Term Disability Insurance
    • Few people are aware of both their own workplace disability benefits and the statistical likelihood of enduring a long-term disability. The fact is one in four employees in the U.S. will become disabled for three months or more at some point during their career. Often, employer provided coverage will cover roughly half of an employee’s base salary, with many group disability plans offering no coverage at all for commissions.
       
  • Life Insurance
    • The biggest gap we find in our client’s financial plans is life insurance coverage. While the odds of dying unexpectedly are admittedly much lower than becoming disabled, the impacts on one’s family are arguably greater. Many employers will offer life insurance to employees in an amount equal to one year’s salary. Great companies may offer 2x salary.
       
  • Retirement Benefits
    • This is where we see some of the most variance between employer’s benefits packages. Matching 401(k) deferrals up to a specified percentage of income limit and profit sharing are the most common retirement benefits we come across. The difference between fractional matching (matching 50 cents on the dollar) and dollar-for-dollar matching up to a specified limit can be thousands of dollars in additional compensation. Whereas many employee benefits can be hard to quantify, retirement benefits are normally easy to translate into dollars, making them one of the most important pieces of a company’s benefits package.
       
  • Golden Handcuffs
    • An often underused and unknown strategy to attract and retain key talent is through what’s called a golden handcuff strategy. Put simply, this is when an employer defers compensation to an employee (typically a key employee) to a later payout date for staying with a company for a specified amount of time. Often times life insurance is used to do this, where an employer takes out a whole life insurance policy on the employee, pays the premiums, and once the allotted time has passed, the employee receives the policy, which has cash value. If the employee leaves the company before the allotted time, the company keeps the life insurance policy, which they can choose to keep on the ex-employee or cash in on.
       
  • Financial Planning Services
    • When most people think of financial planning, they focus on the potential cost and the uncertainty of where to go for sound advice. Including financial planning services as a benefit to employees can eliminate both of those fears and provide relief to those who likely need the advice the most. According to a GOBankingRates study from 2019, 28% of Americans age 55 and over have no retirement savings, and another 28% have less than $50k. Providing access to experienced and credentialed financial planners provides a critical resource for employees who otherwise may never seek the advice that they so desperately need. Some financial advisors include this service as part of administering a 401(k) plan, while others may charge an additional fee. Either way, it’s a great way for employers to show that they care deeply about the well-being of their employees.

There are dozens of potential offerings that employers can choose from for their company’s benefits package. Selecting the right benefits - and the ones that provide the most bang for your buck - can be tricky. Coordination between human resources and outside advisors who have experience analyzing benefits packages is key to building the right mix to attract and retain the best employees.

If you need help reassessing your benefits, whether as an employer or employee, give us a call. We can help ensure you’re optimizing your benefits and incorporating them into your financial plan.

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6 Tips to Increase Your Retirement Savings

For years you’ve been encouraged to sock away your hard-earned money. Building a rainy-day fund, putting enough away to get the employer match on your 401(k), and even contributing to an IRA or Roth IRA from time to time. As retirement approaches and your finances aren’t what you expected you might be asking yourself, “Did I do enough, should I have started earlier, and could I have done more?”

If you don’t think you’ve saved enough, it’s time to start catching up! These are the quickest and easiest ways to beef up your retirement savings.

  1. First things first, create a plan and stick to it. Without knowing where you are now or where you’re headed, it’s tough to know how much is enough. Failing to plan is planning to fail. Connect with a CERTIFIED FINANCIAL PLANNER™ professional or Chartered Financial Consultant® designee (we have four) and make sure you’re on the right path.
     
  2. Don’t leave “free money” on the table. Your employer likely provides you with an opportunity to receive a matching contribution if you defer some of your income into the company retirement plan. It may seem small, but it’s the easiest money you’ll get out of your employer.
     
  3. Consider opening a health savings account (HSA). HSAs are triple tax-advantaged, meaning: contributions to your HSA can be deducted from your taxes in the tax year they’re made, growth on money in your HSA is tax-deferred, and withdrawals are tax-free if used to pay for qualified healthcare expenses. If you don’t end up using your HSA for medical expenses you can also treat it like a retirement account once you turn 65 years old.
     
  4. Take advantage of catch up provisions in your retirement accounts. After you turn 50 years old the IRS allows you to make up for lost time with catch up contributions to your retirement account. This allows you to add an additional $6,000 per year to your 401(k) or an extra $1,000 per year to your IRA or Roth IRA.
     
  5. If you’re self-employed, consider opening up a SEP IRA or solo 401(k). Either of these could allow you to contribute much more income toward retirement than a traditional IRA. Not only can you make employee contributions from your salary, but you may also make profit-sharing contributions as the employer.
     
  6. Carve out 10%-20% of your bonus and stash it away in one of your retirement savings vehicles. It’s in our nature to want to treat ourselves right away after your bonus hits your bank account, but make sure “future you” gets a piece of the action too. Not only will your retirement account grow by the amount you put in, but the power of compounding returns could mean even more down the road.

Andrew MacDougall is an Associate Wealth Management Advisor with Meridian Financial. For more than 25 years, Meridian Financial has been helping clients with individual and business financial planning.

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A Financial Plan is not a Retirement Income Plan

What most advisors put together in a financial plan are all the strategies for accumulating money so you have a large enough nest egg to retire. In a retirement income plan however, we determine how you spend that nest egg to make sure it outlasts you.

One plan is based upon you working to generate income, the other is based on your investments working to generate income.  

These are two very different strategies.

Financial Plan versus Retirement Income Plan—What’s the Difference?

When you are working, you are in an accumulation phase of your life. You are trying to determine how much money you can save each year combined with how much investment risk you are comfortable taking to reach your goals.

When it’s time for retirement, the questions switch to “How much do you need to spend each month?” and “How much investment risk is necessary to make sure your money outlasts you?”

The consequences for not adhering to your plan are much different as well. If you get off-track on your financial plan, you will either have to work longer or learn to live on less.  On the other hand, if you are wrong on your retirement income plan, you will have to reduce your expenses when you are older or potentially look into the most cost-efficient care situation, which is typically to live with family.

So, what does a retirement income plan entail?

Three Steps to Retirement Income Planning:

  1. Expense Review: Take a hard look at your expenses and break them down between essential expenses and discretionary expenses.  Essential expenses are those must have expenses like your utilities and discretionary expenses are your nice to have expenses, like vacations.
     
  2. Income and Expense Matching: Next, line up your potential income streams to each of these expense categories. Ideally you want your essential expenses covered by stable income streams such as Social Security, pensions, and immediate annuities. Your other assets should support your discretionary expenses. These assets should also be managed to minimize the tax impact on their distributions. Less tax means your investments will support your lifestyle longer.
     
  3. Asset Allocation: Coordinate your yearly income needs with your asset allocation. Immediate and short-term income needs should be invested in secure investments such as money markets and bonds. Your longer-term income needs should be invested in bonds and stocks as a hedge against inflation.

Putting together a complete retirement income plan is not easy. The good news is the number of advisors specializing in this area has been growing, so help is available.

Ultimately, with a sound retirement income plan, you can spend less time on the things you don’t like to do and more time on the things you do like to do. You will likely also sleep better!

Bob Rauf is the founding partner of Meridian Financial. Meridian Financial has been helping clients with their retirement income strategies for over 25 years. To talk with Bob about a retirement income plan or other person and business financial planning needs, email him at bob.rauf@nm.com.

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