The current state of our individual retirement preparedness as a whole is captured in this single fact: about half of the U.S. private sector workers at any given time are NOT enrolled in an employer-sponsored retirement plan.
Some of them have participated in a plan in the past or plan on participating in the future. But the inconsistency of participating in their own financial future is the problem. Still, too many individuals are solely relying on their employer-sponsored plans to meet their retirement needs and dreams.
- Build an emergency fund using a high-yield savings account
- Pay off all debt
- Take advantage of tax-sheltered retirement accounts
The financial toll of not saving consistently is modest retirement account balances – balances that are not structured to combat inflation. Yet, saving has become increasingly urgent as traditional pension plans have virtually disappeared from the private sector and Social Security is replacing less and less of workers’ incomes over time. The Center for Retirement Research found in their 2019 analysis of the Federal Reserve’s Survey of Consumer Finances that the typical working household – ages 55 to 64, that save in an employer-sponsored 401(k) had only $144k in their 401(k)s and IRAs combined. That’s just not enough! It’s easy to realize that $144,000 won’t go very far in retirement.
A $144,000 retirement account would yield only $570 per month if the couple purchased an annuity that is structured to pay a guaranteed income for the rest of their lives. Choosing an annuity structured for guaranteed lifetime income is one of the best choices you can make to ensure you don’t run out of money in your retirement years. However, payments totaling just under $7,000 per year does not provide a desirable quality of life. In addition, 401(k) plans charge fees in four categories: investment, administrative, individual service and custodial. These fees range from 1.4% – 3% annually and can have a significant impact on your principal. Some participants end of compromising their investment goals, risk tolerance and common sense just to score a lower fee. This approach often inhibits their ability to structure and income strategy to meet their retirement goals.
Participating in employer-sponsored 401(k) plans can be beneficial when the employer is contributing a monetary match in the participants plan. This should not be the only retirement vehicle that one is utilizing to save for their retirement years. There are too many other safe and tax advantage retirement vehicles out there: Annuities, IRAs, 7702 Plans, etc.
7702 insurance is a hybrid between life insurance and a retirement savings product that builds up cash value at a better accumulation rate than a typical annuity.
Utilize Annuities, Roth IRAs, Traditional IRAs and 7702 retirement plans to ensure your retirement income meets your needs, dreams and goals. Pairing this with passive income strategies and your employer-sponsored 401(k) plan provides a lifetime income and the quality of life you desire in your retirement years.
