In that case, after they have read the associated educational materials provided with the software, we recommend that they either contact the investment advisor for the plan sponsor or their own personal financial planner for further detailed guidance. Or, they can reach out to a financial planner directly through our site.
Once the individual has purchased the insurance that the system recommends, we suggest that they enter in the new insurance amounts and costs into myFinancialAnswers so that it can run an updated analysis of their financial situation.
One of the strengths of the myFinancialAnswers software is that it allows users to create and save different scenarios, in order to see how changing certain financial strategies affects progress toward long-term goals. While your employees can always go back and change their original inputs – creating a new baseline projection – we also want them to be able to explore some “what if” scenarios.
The variables that can be changed using the scenario analysis tool include:
- Retirement age
- Total spending in retirement
- Changes in current spending
- Investment returns
- Level of contribution to kids’ college tuition (if applicable)
Once your employees have changed the variables and created a new set of outputs, they can either save that scenario or change it to become their new baseline that always appears whenever they log into the tool. This tool adds an extra level of depth to our initial recommendations, enabling users to see the impacts of the changes in action.
Since myFinancialAnswers is not a Registered Investment Advisor, we are unable to provide specific investment recommendations. Our software will make recommendations for how much to invest and it will give explanations of asset allocation basics. It will also, where applicable, explain what the qualified default investment alternative (QDIA) is within a retirement plan. But it is beyond the scope of our tool to recommend specific stocks or funds.
ERISA law sections 3(21) and 3(38) regard advisers who provide “investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan” as fiduciaries to the plan, creating additional obligations and liabilities for one who is categorized as such. The plan provider and the investment advisor who assists in designing the plan and selecting investments serve the fiduciary role for the 401(k) plan.
We do have the ability, if desired, to direct your employees to an advisor who can provide that advice. If they’re looking for more comprehensive advice – or recommendations on how to allocate their 401(k) plan – they can either ask their retirement plan advisor, consult their own financial advisor, or contact a financial planner directly through our site.
Without any input, the software will make basic assumptions about your employees and generate a recommendation for a contribution amount that will maximize their probability of being able to retire at age 65 and have money that lasts through age 100. As they enter in more information about their (and/or their family’s) financial situation, the software will refine its recommendations to provide a more accurate contribution number. For example, if your employees have other investment accounts and spouses who earn income, then that information will be incorporated into the calculations in determining an appropriate contribution amount.
Here are a few questions that our software won’t answer for your employees:
- What should I invest in?
- Which life insurance company should I use?
- How much is an appropriate monthly food budget?
Our software will give your employees the ability to find the answers to those questions, but it won’t necessarily make the answers explicit. If they need additional help, your employees can reach out to a financial planner through our tool, using the output they receive from the software as the foundation for their further discussions.
The next time the employee attempts to log into MyFinancialAnswers, he or she will be provided with an opportunity to enroll as an individual to retain the tool’s information and recommendations. The 401(k) matching information will naturally change, as the employee will no longer be a participant in your company’s plan. If the employee moves to a company that also subscribes to myFinancialAnswers, the information can be transferred to the new employer.
There are annual enrollment costs associated with the program. They can be paid from the 401(k) plan assets or you may choose to pay them as an additional employee benefit.
Increased 401(k) match contributions
Participation in the program may cause higher 401(k) plan costs, because participants will likely end up contributing more to their plans. Since they’ll contribute more, you may need to spend more matching those contributions. Of course, for some smaller businesses, these increased contributions may actually help the 401(k) plan meet certain non-discrimination tests, so that cost could be mitigated somewhat.
You may not see immediate bottom line benefits; however, whether you realize it or not, employee personal financial problems affect their productivity, costing as much as $5,000 per employee per year. By helping your employees solve their personal financial issues, you’re increasing productivity, which will improve your bottom line. For a deeper discussion of the benefits of workplace financial planning programs, please read our full article on the topic.
However, that training probably also leaves your employees wanting. They look at their enrollment forms and ponder other questions in their financial lives. What should their budget look like? How much insurance do they need? What about those student loans or the mortgage? How will they pay for their kids’ college? Should I be contributing more to my 401(k)? Less? Nothing at all?
Ultimately, despite its many benefits, the 401(k) is a retirement plan that doesn’t answer the most basic of questions: when can I retire? That’s where myFinancialAnswers can help.
In a few minutes, employees can get a comprehensive financial plan that answers many of the questions they have about their financial lives. The self-guided training provided with myFinancialAnswers can help your employees understand why they need to make the financial decisions that our tool recommends, and how all of the pieces of the puzzle fit together. With our tool, your employees can gain confidence about their financial security, reduce uncertainty, and return to focusing on their work, not their worries.
For more information on the role of financial planning within a 401(k) program, you can read our full article on the topic.
Furthermore, research suggests that workers who engage in comprehensive financial planning report $173,000 more in retirement savings than those who do not. There is also no difference between those who have no retirement plan at all and those who work with non-comprehensive financial advisors (like brokers or sales representatives pitching investment funds). Comprehensive planning is, ultimately, the only proven method to improve retirement outcomes.
Simply put, without comprehensive financial planning, your employees aren’t addressing the stress they feel about their finances, which means that you’re not getting their full attention and best efforts while they’re at work. You may think that workplace financial planning is an HR and a benefits issue; we believe that it’s an operational issue as well.
If you’re interested in learning more about the benefits of workplace financial planning, feel free to read our full article on the topic.