Participants January 25, 2021

Retirees and Near-Retirees Need an Annual Financial Checkup

Retirement plan sponsors can remind participants to review their finances and provide resources for them to do so.

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Retirees and those nearing retirement should revisit their finances every year, according to Kathleen Stewart, senior wealth strategist at BNY Mellon Wealth Management.

“This should include being prepared to address unforeseen events, such as the COVID-19 pandemic,” Stewart says. “Seniors and retirees can do this by using a total balance sheet approach. This means periodically reviewing their total balance sheet to consider all available funding solutions, including borrowing to avoid disrupting one’s long-term investment strategy and to avoid incurring capital gains taxes.”

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Stewart also suggests that people who find themselves in a lower tax bracket prior to retiring should consider a Roth individual retirement account (IRA) conversion. “If their income is lower, and especially if IRA/qualified retirement assets are not needed to cover retirement expenses, it is appropriate to consider a Roth IRA conversion,” she says. “That can happen all at once or over the course of several years.”

Stewart says she approaches the annual financial review for retirees and near-retirees “from a broad perspective.” BNY Mellon suggests seniors and retirees focus on five areas, Stewart says: investments, spending, borrowing, managing for taxes and protecting assets.

“One of the things I stress is for retirees and near-retirees to look at their current goals, rather than assuming the entire time they are in retirement they will not work. It is possible that someone heading into retirement will leave their lifelong career in pursuit of a passion or to manage a new business.

“One of the other areas that is probably the most overlooked in retirement is failing to protect assets,” she continues. “Folks in retirement should have an estate plan and address who their beneficiaries are. They should pay attention to the titling of their assets to provide creditor protection. Maybe they should create a trust. They should also review their health care, long-term care and property and casualty insurance. There are legal documents that need to be reviewed. If they fail to do so, what would otherwise be a sound and successful retirement could be completely derailed.”

Data and Research January 25, 2021

Employers Continuing to Adjust Benefits in 2021

A Conrad Siegel report reveals challenges employers faced with their benefits in 2020 and what changes plan sponsors are making in the new year.

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A new survey from employee benefit and investment advisory firm Conrad Siegel shows how employers have adjusted their retirement plan and health care benefits during the COVID-19 pandemic.

Of the 100 plan sponsors who were surveyed, 57% said the biggest change to their total benefits packages last year was the increased opportunity for staff to work remotely. Additionally, 40% of employers reported that they made changes to accommodate flexible work schedules. Only 9% of employers in the survey made changes to the retirement plan, 7% made changes to health care benefit and 6% made changes to parent and child care benefits. Forty percent of employers reported zero changes to their total benefits packages.

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When it came to employment, 12% of employers implemented permanent layoffs and 23% furloughed staff members. Seventy-five percent of employers took no action with employment.

The survey reports there were few changes made to most retirement plan benefits. Only 2% of plan sponsors eliminated employer contributions and 4% reduced employer contributions. In fact, 94% of employers reported no changes to retirement plan employer contributions. Instead, more than half (52%) of employers added an in-service withdrawal provision from the Coronavirus Aid, Relief and Economic Security (CARES) Act, and 25% increased retirement plan loan limits in line with what was permitted by the act. Nineteen percent of organizations included retirement plan employer contributions on Paycheck Protection Program (PPP) loan forgiveness applications.

The coronavirus pandemic underscored a massive demand for quality health care benefits and led many to question weaknesses in the health care industry. Forty-nine percent of employers reported their biggest challenge in employer-sponsored health plans was standard and ongoing health costs not related to COVID-19, and 31% reported additional cost increases due to COVID-19 as their greatest test.

However, most employers do not anticipate that the pandemic will have a large impact on projected health care costs in the immediate future. Fifty-four percent expect the pandemic will not materially increase or decrease estimated health care costs. Ten percent expect a decrease in overall estimated costs and 34% predict an increase.

Other challenges included providing adequate mental health services for members (22%) and the availability of maintenance care or preventative care services for members (15%). Because of these challenges, more employers are expecting to make well-being services more widely available, and others are expanding benefits. Fifty-four percent of employers anticipate an increase in mental health/substance abuse services in 2021 due to COVID-19. Twenty-five percent of employer-sponsored health plans have extended cost-free virtual visits for members because of the pandemic, and 17% of employers extended additional paid time off due because of pandemic.

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