4 steps to improving your 401k plans
Chad Parks discusses 4 tips to help strengthen plans for your 401k
- Duration 8:23
- Date Sep 10, 2012
Chad Parks discusses 4 tips to help strengthen plans for your 401k
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Out today that Kim joins now in studio with the CEO of the online for a long OKMR Chad -- thank you for coming in and joining us extra.
So -- yeah probably save more money for retirement.
Had big question you know start living your life.
Your previous segment -- and I was very appropriate because the the recession of 2008 which were still living when people saw their home values decline so greatly.
It was a big wake up call that that was not going to be your retirement account and so I've seen as a shift towards.
People realize they need to take personal responsibility and start saving again.
So how do we do that how we do that -- in most tax advantaged -- efficient way and really that's 41 K plans to workplace savings OK so how do we save more and -- violent -- well.
Most you have to have one available to you -- unfortunately.
People who work for small businesses the SBA small business -- tells us that 92%.
Companies that have to -- poised to offer any kind of retirement say so what do in that case could -- and that's a very startling the minute represents almost forty million workers who don't have -- 141000040.
Million workers who don't have access to retirement savings that work.
So what do we do about that exactly so.
Our our mission is to try to get as many small businesses to realize that 41 K plans and or any kind of workplace retirement savings are easy to put in place and then incentive -- and incentives for workers it's a true employee benefits the benefit being you know compared to benefits of like health -- and these are very low cost and very easy to run -- and -- -- there's a big misperception out there that.
Companies have to do match you know so that keeps them away from -- offer for -- right -- but the fact is that matches are not required.
-- -- -- -- Actually in our creeks are client base about 50% of our company's -- match which is rather surprising because most people are afraid it would be at that they once they realize how easy it is.
And how affordable they can actually make it may actually put it in place.
There's a lot of tax incentives on the table right now -- just to back up before it into the tax incentives just what exactly do you mean by that it's OK so -- Yeah that's that's a good question because as we get too much and industry jargon -- lose people so thank you for helping them.
So I'm a match means that for every dollar that you put into your own -- -- savings to -- your retirement account.
The company says -- put another dollar and up to a certain amount.
At which is that amount usually it for comment try it anyway it's become each company can decide -- -- 5% as a good number of so the first 5% of your savings the company is also -- -- put -- 5%.
-- -- -- -- So that's that's what we call free -- why would you bet on the table and that's available to -- Yet now if your small business owner that matching program can actually help pay for your own personal savings because the tax deductibility.
And the tax credits to go and play to put -- -- can pointless right okay so let's get into the taxes -- account.
So unpopular realize that a small businesses come on if you have a business has under hundred employees -- there's 500 dollars a year tax credit on the table.
To offset the administrative and record keeping costs so that's a given the clones -- -- and that book I'm I'm asking my everyday -- Four million businesses great but.
So did and there's been -- every dollar that goes in his tax deductible and there's immediate taxation so so those dollars being.
Out the door going to the IRS you know you'll get your -- seven their goes it's going federal tax -- -- -- You can re -- some of those dollars into your own 401K account every paycheck and that's like its magic.
Now what's this about fees.
So fees yeah I was.
Hidden and people don't realize that that's right this is sort of the dirty secret of our industry and unfortunately it has been this -- for a long time.
But through a decade of work plus those that is changing so the Department of Labor this year has issued regulations which not require for KP disclosure.
So the first time ever.
You're actually gonna do seem black and white what it is you're paying who you're paying and how much they are getting typically small -- probably don't even notice that he.
Deathly don't notice because they're small percentages and they're -- -- -- nobody.
64 page contractor not gonna want to dig through the back in the -- where my yeah.
And they in our industry of course -- -- done a good job of not making it very clear whom -- an example I can give you is that asset based fees -- -- percentage of your personal savings.
Are the biggest hidden.
And there are options out there that are as low as one half of 1% so it's five times more expensive so like.
That's like going to the dealership and paying a 100000 dollars of that car when you only really need to pay -- and why would you do that.
Right so that's -- -- disclosures gonna help is now you'll have the data its -- -- make these decisions let's say now we know with the fees were being charged size or way to get around them.
Not so much get around and does this make sure -- getting the best value for the money that your spending it's like anything you know you have to you want the providers circuit might do plan.
To be profitable until the service you and stay in business themselves so it's a matter of finding the right fee structure for your business and not pay more than half so.
Okay and what is small businesses saying about.
In 92% of them not offering 401 -- but they have over how to -- justify that.
You know it didn't have being a small business owner myself I know how hard it is how many -- -- have to where do you have so many things pulling at you have so many government regulation -- you have.
The -- mandated employee benefits you have the optional employee benefits.
You have HR issues you have accounts payable receivable is so much that it has always.
So why -- people limited resource that is right and so retirement savings it's it's one of these human nature things is that we don't.
We have a hard time visualizing her future selves.
So therefore we don't take action today there's no bid and also the other part is it's not a lot of immediate gratification in retirement -- exactly -- A lot of people you know live now -- not really for the future so maybe it's not -- parity rate so many -- so.
What is being done to get more small businesses on board well.
They did this sort of that perfect storm.
In my opinion what's happening so we have the demographics of the baby -- -- -- 101000 a day turning 65 for the next -- -- for the next similarities.
Yet because that's how big the bubble.
So that's that's a huge impact trade and most of them are not very well prepared for retirement we have the issues of Social Security which are on everyone's minds especially during this election cycle.
What are we gonna do to fix Social Security how -- Social Security become.
The main pillar of retirement when is only meant to be supplement -- were examining that and then people are starting to realize that he I've got a plan around Social Security.
Pension plans that companies use to offer most people have a pension plan available to them so the three legged -- retirement.
Is becoming a one legged stool or pogo stick as somebody wants that to me.
And it's about personal savings and and so you know with that storm of that all the everything that's being focused on.
And we look at the different generations as they are moving through and their own experience is what -- means to them.
I think what's happening is we're really seeing a major redefining.
Of retirement means in America and you know 65 was an arbitrary and never say anything an -- -- dramatically you handing your keys and get your gold watch -- That's not happening today for most people now and so you know the awareness factor.
The media people -- -- -- -- helping us to get the word out obviously the government has incentive to get people to save for themselves and get so that does become a burden on the public.
-- -- -- And -- you know -- on our company ourselves all dual selfless public -- we are actually producing a documentary on this very issue that has called broken eggs film.
And it's about looking at the looming retirement -- in America rotten eggs in the so we releasing the trailer.
He's what you that I well -- to us.
Have you seen any studies or polls or surveys done showing that.
Offering a 401K plan is a huge incentive for person to apply for certain job or accept that job.
Absolutely as a great question and there are a lot of data and a lot of studies out there that show.
That the number -- benefit that an employee's gonna look for when considering an employer is a retirement -- number one's in health care.
Okay right maintenance and -- -- such a wealth of information is there anything you wanna tell us or do you wanna ask you that we haven't covered.
But that's a -- 100 I know you look at that's still nine ahead anything -- give us now.
Well I I think back to the idea of personal responsibility you know we really we can't -- heads in the sand.
You know thirteen years ago was 1999.
Thirteen years from now it's 2025.
-- when Social Security start gonna have some problems I can remember 1999 yes until 2045 not that far out.
So it's kind of like let's just have a little wake up call be real with each other about this.
-- parks -- let's say the online 401K.
Thank you so much for coming -- -- cannot utter -- -- that trailer for Libya it's just to find out right we're heading to a.