Skip to content

    Defining Workplace Goals is a Vital First Step to an Effective Retirement Plan

    February 23, 2023

    Retirement plans can be as unique as your company and its employees. Yet many committees do not take the time to set specific goals for their plans. Without defined goals, it can be difficult to create an effective retirement plan that meets expectations. Here’s helpful guidance about defining your plan goals and offering this benefit which helps everyone save toward retirement success.

     

    Each time you discuss the company’s 401(k) plan, it is an opportunity to identify goals and align plan design.

    Aligning plan goals with specific features has the potential to improve outcomes. Plan considerations might include who is eligible, whether to make employer contributions and if it makes sense to automatically enroll and regularly notch up participant deferrals – called auto-escalation.

    Proactively identifying specific goals helps you offer a more competitive benefit that can:

    • enhance recruiting and retention
    • boost savings rates
    • save you and your employees money
    • improve retirement readiness and financial wellbeing

     

    Identifying Key Plan Goals

    Identifying 401(k) plan goals is a vital first step in effective plan management. Without clearly defined goals, plans often fall short in key areas, including fiduciary governance, investment offerings, participation and engagement.

    Here are three common goals business owners should consider as they begin to think about designing a 401(k) benefit that meets their needs, as well as those of their business and employees:

    Tax savings for owners

    One of the more common ways employers utilize the company’s retirement plan is to maximize their contributions. Whether a pre-tax deferral through a 401(k) and/or by adding a profit sharing contribution, the employer usually works closely with a TPA to find ways to maximize their saving opportunities.

    Another way employers use this benefit is by saving through a Roth.[1] The Roth 401(k) does not have income restrictions, and you can save up to the general 401(k) limit. Roth contributions are a way to add tax planning flexibility in current and future years.

    And for companies that offer employer contributions – such as a match or profit sharing – they are deductible to the business. This may lower the overall tax burden, especially for sole proprietors, S-Corps, LLCs and other pass-through entity small businesses.[2]

    Proactive initiatives to enhance successful retirements

    Much like a parent has their best interest in mind for their children, plan fiduciaries should always act in the best interest of the plan’s participants. In doing so, two ideas that can help are auto enrollment and auto escalation. This is where participants are automatically enrolled into the plan and then contributions are increased gradually over time (typically 1% per year up to 10-15% of earnings). Automatic features have been shown to improve participation and savings rates.

    According to a recent study, 90% of participants remain in the plan following automatic enrollment. Moreover, 83% of employees say they don’t mind being auto enrolled at a deferral rate of 6%.[3]

    The third activity is re-enrollment to rebalance participants into an appropriate investment mix. Generally, the participants are re-enrolled into the plan’s QDIA. By doing this, the asset allocation is aligned with the participants risk/reward glide path towards retirement.

    Recruit, reward, and retain top talent

    When workers are evaluating multiple job offers, the quality of your 401(k) plan can make or break their decision to join your company.

    A plan that entices employees to save for retirement at a meaningful rate— by offering employer matching contributions, automatic enrollment and auto escalation, for example—has significant potential to be an attractive benefit that can help you stand out in a competitive labor market.

    Providing employees with a powerful retirement plan benefit also enables them to invest more appropriately for the future, including during periods of market turbulence. Having access to a 401(k) plan affords them the advantage of time-tested investing strategies, such as dollar cost averaging, by contributing a portion of every paycheck.

     

    Successful Plan Design Starts with Proactive Planning

    Designing a 401(k) benefit that mirrors your goals for the plan may seem intimidating, but it doesn’t have to be. First and foremost, we can help you develop a proactive mindset that defines the plan’s goals and takes the appropriate steps toward achieving them.

    No 401(k) plan design is one-size-fits-all. Which is why we are here to help you offer a 401(k) plan that reflects your goals and meets the needs of your business and employees.

     

    [1]The plan needs to allow Roth contributions.
    [2]Please consult your plan’s Third Party Administrator (TPA) and tax advisor for specific details.
    [3]Principal Retirement Income Solutions Data. March 2019.
    ©401(k) Marketing, LLC. All rights reserved.
    © 1993-2024, Allworth Financial. All rights reserved.

      Privacy Policy   |    Disclosures   |    Cookie Preferences   |    Do Not Sell or Share My Personal Information

       

      Advisory services offered through Allworth Financial, a Registered Investment Advisor | Disclosures | Privacy Policy

      Securities offered through AW Securities, a Registered Broker/Dealer, member FINRA/SIPC. Check the background of this firm on FINRA's BrokerCheck.

      HMRN Insurance Agency, LLC license #0D34087

      1Barron’s 2024 Top 100 RIA Firms. Barron's© magazine is a trademark of Dow Jones L.P. The ranking of independent advisory companies is based on assets managed by the firms, growth, technology spending, succession planning, and other metrics.

       2 Retention Rate Source: Allworth Internal Data, FY 2022

      3 The NBRI Circle of Excellence Award is bestowed upon NBRI clients meeting one or both of the following criteria: Total Company score at or above the 75th percentile of the NBRI ClearPath Benchmarking Database and/or improvement of five (5) or more benchmarking percentiles in Total Company score over the previous survey. 

      4 As of 7/1/2024, Allworth Financial, an SEC registered investment adviser and AW Securities, a registered broker/dealer have approximately $22.5 billion in total assets under management and administration. 

      5 InvestmentNews 2020 and 2021 Best Places to Work for Financial Advisers. The ranking reflects survey responses and scores completed by both employers and employees. Employers report their organization’s workplace policies, practices, and demographics. Employees complete a survey designed to measure the employee experience. 

      6  2021 Value of an Advisor Study / Russel Investments

      7 Ranked 9th Top Wealth Managers By Growth in Assets in the U.S. from RIA Channel, 2022. RIA Database and RIA Channel are registered trademarks owned by Labworks, LLC.

      8 USA Today Best Financial Advisory Firms 2024. The ranking is based on the growth of the companies’ assets under management (AUM) over the short and long term and the number of recommendations they received from clients and peers.

      9 NBRI Best in Class Ethics 2023. The Best in Class level is bestowed upon clients performing at or above 90 percentile of the NBRI ClearPath Benchmarking Database.

      ✢ Scott Hanson, Investment Advisor 2005, 25 most influential people in the financial services industry. The ranking reflects 25 people who Investment Advisor magazine believes have had or will have the greatest influence on the financial services industry.

      ✼Pat McClain, InvestmentNews 2014, Invest in Others Community Service Award, presented to an advisor who has made an outstanding impact on a community through managerial contributions to a non-profit organization.

      †Financial Times, FT 300 Top Registered Investment Advisers, June 2019. The ranking reflects six areas of consideration including the company's years in existence, industry certifications of key employees, AUM, asset growth, SEC compliance record and online accessibility and calculates a numeric score for each company. 

      Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.