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You may be in the right place at the right time to get business. How? As a benefits plan professional you wear many hats. One might be teacher. The employees at a company might need to be trained, told why starting early to plan for retirement is better than waiting. If you do a good job, this could lead to rollover business for experienced workers and IRA accounts (in addition to workplace plans) for younger employees.
But you need to make a compelling case. Here are some reasons you can give for why people need to start saving for retirement:
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1. Think about real estate. Most people know at least one person who has made money selling real estate they own. Their parents might talk about how little they paid for their house and how much it's worth today. The saying goes: "You don't wait to buy real estate; you buy real estate and wait.
Apply this to retirement plans: The stock market has historically returned 10% a year on a average. It's had it's big up years and big down years. You want to be invested as long as possible and hopefully get the average. (Of course, nothing is guaranteed.)
2. Dollar cost averaging. Imagine you put all your money into the stock market at once. You might have picked the low day for the year. Maybe you picked the high day. It could have gone either way. You won't know until later. Better to put it in a little at a time.
Apply this to retirement plans: If you are automatically investing the same amount every month, there will be days when the market is low and you buy more "shares" and other days at when the market is high and you buy less "shares." By investing gradually, time is on your side.
3. The rule of 72. Generally speaking, if you take a rate of interest and divide it into 72, the number you get is how many years it takes to double. The more years you have before drawing out, the better.
Apply this to retirement plans: Imagine you are 18 years old and have $10,000 in a tax-deferred retirement account. Now imagine it was invested in stocks and the historical annual return was 10%. This means it would double about every seven years. At 25 you might have $20,000. At 32 it might be $40,000. At 39 you are looking at $ 80,000. At 46 it might be $160,000. At 53 it could be $ 320,000. At age 60 maybe $640,000. At age 67, if it doubled again, it might be $ 1,280,000.
4. Taxes will clobber you. When you are young, you have few tax deductions. Your salary is fully taxed. As you get older, you might have a home with a mortgage. Rental property. Property taxes paid. As your life gets complicated, there can be more deductions.
Apply this to retirement plans: Retirement savings, like your 401(k) contribution or IRA contribution, come off the top. You aren't taxed on them now, because your retirement savings in both vehicles is tax deferred. Taxes are paid when you withdraw money.
5. Money burns a hole in your pocket. It's human nature to want things. Shopping is a sport in America. We shop for entertainment. If you don't consciously put money away, you will find a way to spend it. Money talks. It says goodbye.
Apply this to retirement plans: If dollars for retirement savings come out of your paycheck before you get it, most people learn to live within their means.
6. Don't leave money on the table. Your company is likely matching your retirement plan contributions up to a certain point. But they aren't going to put up their money if you don't put up yours.
Apply this to retirement plans: If your company said: "We want to give you a couple of thousand dollars," would you say: "Keep it, I don't want it."
7. Financial independence. All this saving helps you build a nest egg. It's a financial cushion. When it grows large enough, you can look at getting income from it. If it can supply a good enough income from a reasonable rate of return, you can choose if you want to keep working.
Apply this to retirement plans: It's a great feeling to work because you choose to, not because you have to keep working. But you must get to that point.
These are compelling arguments to start saving now, even if retirement seems a long way off.
Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, "Captivating the Wealthy Investor" can be found on Amazon.
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Bryce Sanders
Bryce Sanders, president of Perceptive Business Solutions Inc., has provided training for the financial services industry on high-net-worth client acquisition since 2001. He trains financial professionals on how to identify prospects within the wealthiest 2%-5% of their market, where to meet and socialize with them, how to talk with wealthy people and develop personal relationships, and how to transform wealthy friends into clients. Bryce spent 14 years with a major financial services firm as a successful financial advisor, two years as a district sales manager and four years as a home office manager. He developed personal relationships within the HNW community through his past involvement as a Trustee of the James A. Michener Art Museum, Board of Associates for the Bucks County Chapter of the Fox Chase Cancer Center, Board of Trustees for Stevens Institute of Technology and as a church lector. Bryce has been published in American City Business Journals, Barrons, InsuranceNewsNet, BenefitsPro, The Register, MDRT Round the Table, MDRT Blog, accountingweb.com, Advisorpedia and Horsesmouth.com. In Canada, his articles have appeared in Wealth Professional. He is the author of the book “Captivating the Wealthy Investor.”
