Providing such insights helps focus conversations on how to make 401(k)s and other retirement savings plans as effective as possible. Anecdotally, employers become more open to discussions about retirement plan design enhancements such as automatic enrollment, automatic deferral increases, matching contributions and other behavioral finance tactics.
Education, always an important consideration at the workplace, becomes an even bigger priority. Advisors may have new opportunities to conduct retirement educational sessions tailored for pre-retirees on a myriad of topics. Meanwhile, advisors can suggest insider specific retirement saving and income strategies:
• Maximizing deferrals. Participants in a 401(k) or other defined contribution plan can save up to $19,000 annually. Those savings can quickly add up, even over a short amount of time.
• Using the catch-up provision. Savers who are age 50 or older can save an additional $6,000 annually in a defined contribution plan for a total of $25,000.
• Taking advantage of any employer match. Consider saving enough to secure at least the available maximum in matching contributions.
• Saving pre-tax. Contributing pre-tax dollars to a 401(k) or similar plan can reduce the saver’s taxable income, potentially freeing up additional dollars for retirement savings.
• Working longer. Many boomers have already concluded that they will need to work longer. Many boomers may be in demand, especially those with hard-to-replace skills.
• Putting off taking Social Security. Postponing Social Security at age 65 or later can boost future payments by 8 percent for every year the income is deferred until age 70, the Social Security Administration reports.
• Working in retirement. More than one-third of people who retired within the past five years say that employment is a current source of income, according to research by MassMutual in 2014 (Source: MassMutual, Hopes, Fears and Reality, 2014).
Helping employees become better prepared to retire ultimately enables them to retire on their own terms as they see fit. Sweetening retirement benefits and providing enhanced financial security may also incentivize employees who love their work to continue being productive past their traditional retirement age for their current employer.