A recent study by the Consumer Federation of America (CFA) spotlights the value of employer sponsored disability coverage in helping meet the health and financial well-being of workers.
According the Social Security Administration, one in every four employees will use their disability coverage at some point.
Despite this need, the nationwide survey found that fewer than two in five workers (39%) in the private sector have short-term disability (STD) coverage through their employers and only one in three (33%) have employer sponsored long term disability coverage (LTD).
Studies by the U.S. Bureau of Labor Statistics and Mathew Greenwald & Associates have found similar rates of participation in these programs.
CFA Executive Director Stephen Broback says, “Surveys have shown that disability insurance is a critically important part of the social safety net”. . . “that plays an essential role in protecting the emotional and financial lives of workers.” Based on the study’s findings, he urged “all employers to offer the option of obtaining disability coverage.”
The survey also found that when businesses don’t offer LTD, many workers would buy it for themselves if they could receive the lower group rates available through employer sponsored coverage. Most disability plans cost workers between $10 and $30 per month, and the average monthly premium for STD coverage comes to $18.
More and more employees are benefiting from these plans, an estimated 650,000 disabled workers received employer sponsored LTD payments last year.
If you’d like to offer your employees this valuable “peace of mind” benefit, or for a complimentary review of your disability plan,– feel free to get in touch with us at any time. It’s our pleasure to serve you.
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For your workers to enjoy the full financial benefits from their 401(k) plans, experts recommend that employee education sessions make sure that participants:
- Contribute enough to receive the maximum match. One expert estimates that at least one in three employees don’t make the maximum contribution, which means they’re leaving free money on the table.
- Avoid account trading. Because it’s all too easy for plan participants to panic at market bottoms and be over-confident at tops, advise them not to open their account statements during these periods.
- Diversify. Concentrating account balances in one or a few funds that employees feel will perform well or are safe means making a risky bet on only one economic scenario.
- Keep their money in the plan. Employees who take out loans on their funds, make withdrawals or cash out a 401(k) when they change jobs will have to pay taxes and penalties that reduce plan payout by almost 50%, which will make it impossible to save enough for retirement.
- Keep saving. Workers stop saving for a number of reasons. The equity market falls, their spouse loses a job, they want to save outside the plan for a home, car, boat, marriage, etc. It’s far better to lower their contribution if necessary, without going to 0%. Remember, employees need to average 15% in savings over an entire career to retire at their current standard of living.
- Focus on the bottom line. The most important factor in a 401(k) is not the allocation of assets, market timing, or investment performance, although these are important. It’s how much the employee saves!
Make sure that you follow these guidelines in retirement planning education for your employees. They’ll be grateful for your encouragement and support.
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No matter how old you are, retirement will be here sooner than you think. Your employer can help you prepare for this season of life. As you decide if you should transfer existing 401(k) funds into a Roth 401(k), consider your tax preferences.
When You Pay Taxes Matters
Most investment strategists typically recommend that consumers like you invest pre-tax money in their retirement accounts. That means you deposit funds into your retirement account before you pay taxes on the cash. Traditional 401(k)s work this way and allow you to pay taxes on the money you withdraw during retirement.
Open a Roth 401(k), and you’ll be depositing cash that’s already been taxed. When you’re ready to retire, the only taxes you pay are on the profits your investment earned.
You Choose the Option You Prefer
Ultimately, the choice of whether to stick with a traditional 401(k) or transfer to a Roth 401(k) is up to you. After all, it’s your money and your future. Your current and future tax brackets are invaluable tools that can help you decide what to do.
*If your current tax bracket is fairly high and you expect it to decrease once you enter retirement age, stick with your traditional 401(k).
*If you expect to be in a higher tax bracket during retirement or are you a young worker who’s just starting out in your career, the Roth 401(k) is a wise choice. It lets you pay taxes on your investment now when you have more disposable income.
Are you ready to make a decision about whether or not choosing a Roth 401(k) is right for you? Then, talk to your company’s human resources department. Find out if the new Roth 401(k) is available and clarify any questions you might have about retirement investing. With this information, you ensure your retirement account wishes are put into practice as you prepare for the future.
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11 years ago
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by
Shawna Kreis ·
Comments Off on Are you offering your employees the best benefits possible?
Finding — and keeping — great employees is always the challenge of any business. While recruiting and training employees can be an expensive process, it is an investment in the growth and well-being of your company. In order to protect your investment, you need to make sure you are giving your employees the best benefits for their needs.
Health Insurance
Whether you are required by the federal government to provide health insurance to your employees or not, you should offer them the choice. In addition, paying for a certain portion of that health insurance goes a long way toward retaining those high-quality employees you worked so hard to find and train.
Retirement Plans
If you have a young workforce, you might not think that they are concerned about retirement. Even though young people thrive on adventure, it doesn’t mean that they aren’t planning for their retirement. Offering the option to pay into a retirement plan helps your employees plan for their future and makes them feel like you are invested in that with them.
Other Benefits
While other benefits such as life insurance, disability insurance and vision and dental coverage might not be on the must-have list for all of your employees, it is still important to offer them these options. Providing a range of different benefits allows your employees to pick and choose those options that best fit their situation at that time. You will likely find that their choice of benefits changes as their life circumstances change. A 20 year old employee, for example, might not be interested in obtaining life insurance until he becomes a father years later.
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