It isn’t exactly Mardi Gras, but far more important. Financial Industry Regulatory Authority, better known as FINRA, announced National Retirement Planning Week (April 13-17) on Monday—which it described as “a perfect opportunity to focus on arguably the most important piece of the financial-planning pie.”
The consumer focused campaign nonetheless has implications for advisors, and bluntly stated that there is an urgent need for retirement planning. A unique set of challenges has emerged that make planning essential, including changes in employee benefits, longer life spans, and rising costs of health care. Add to these challenges another reality: more Americans are shouldering the burden of saving for retirement on their own.
Become Retirement Ready
Many Americans are not financially prepared for their post-working years. Only 54 percent of non-retired respondents to the FINRA Investor Education Foundation’s National Financial Capability Study said they have some kind of retirement account.
But the National Retirement Planning Coalition—a group of “prominent education, regulatory, consumer advocacy and financial services organizations behind National Retirement Planning Week”—believes retirement readiness is achievable. The coalition recognizes that saving and crafting a plan for retirement is a long-term process and with different steps at difference stages of life.
“To help us on our way, the coalition offers resources for everyone from students to grandparents,” FINRA adds. “These resources aim to help us take steps, both large and small, on the path toward retiring on our own terms.”
Steps to Get You Started
Planning for retirement obviously starts with having a ballpark idea of longevity and how much money the client will need in retirement.
The SRO recommends they use the Social Security Administration’s Life Expectancy Calculator to help determine how many years of retirement they might need to plan and save for.
They should then try one or more retirement calculators to estimate how much they’ll need to save to meet their likely expenses. Many retirement experts estimate clients will need between 70 and 85 percent of their pre-retirement income to maintain their standard of living after they stop working. But that formula might be too simple, and possibly too low, to account for what they’ll actually spend. For instance, they’ll need more if they have expensive hobbies or plan to travel a lot. They may also need more if they or their spouse or partner are in poor health and have substantial medical expenses.
Most important, they should save money in accounts earmarked for retirement.
Whenever possible, FINRA recommends using use tax-advantaged savings accounts like 401(k)s to save money on taxes and boost retirement security. Contributions to a traditional 401(k) are not subject to income tax withholding and are not included in taxable wages—and earnings on Roth 401(k) contributions are tax-free. In 2015, contribution limits increased, so they can contribute up to $18,000 to your 401(k)—and if clients aged 50 or over, they can contribute an additional $6,000 for a total of $24,000.
“Any day is a good day to start, or increase, retirement savings and step up planning,” the organization concludes. “What better time to take action than National Retirement Planning Week?”
See Also:
- FINRA Report Highlights 4 Key 2023 Exam Priorities
- Has the DOL Rule Really Changed 401k Rollovers?
- 401(k) Business Growth: Understanding Generational Shifts
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
