30
For Advisor Use Only
March/April
2014
Retirement Consulting
for providing simple illustrations, such as the 401(k) Savings
calculator. Access these resources on COMMunity Link
®
at Financial Planning & Research > Research Tools.
IRA Benefits
Some workers don’t have access to retirement plans or
company matches. This shouldn’t discourage them from
saving using IRAs. In particular, young workers should
examine the benefits of Roth IRA contributions.
With a Roth, taxes are paid up-front (as opposed to
traditional IRAs, where taxes are deferred). The bet is that
the account owner’s marginal tax rate is less today than
it will be at retirement because tax rates typically increase
over time. Young workers are likely in the lowest tax brackets
of their careers and have the longest time horizon until
retirement. This is a perfect scenario for maximizing growth
on Roth contributions.
Combine Employer Plans and IRAs
If a worker is maxing out a 401(k), it’s wise to also contribute
to an IRA; he or she should consider Roth deferrals in this
situation, if possible. Younger workers may be able to
contribute the maximum to both a qualified plan and an IRA,
even if they are subject to lower phase-outs due to filing single.
Consolidate at Every Move
Millennials will probably work for several companies during
their careers
1
. If your millennial clients have already switched
jobs several times, ensure that balances in previous employers’
retirement plans are accounted for and consolidated. With
auto-deferral features in 401(k) plans, employees may have
begun building up retirement savings without realizing it!
Delivering pertinent messages to millennials can take
time and internal resources. Leverage the resources that
Commonwealth provides through our Retirement Plan
Resource Center at Products > Retirement on COMMunity
Link to help reach these young prospects through social
media and explain retirement benefits using the RetireReady
education materials. Remember, the future profitability
of your firm could depend on it.
John Peters is business development consultant in
Retirement Consulting Services. He is available at x5990 or
at
Derek Swinamer is a retirement plan sales consultant in
Retirement Consulting Services. He is available at x9926 or
at
The average member of Gen Y carries $45,000 in debt,
with student debt being the most common form.
— PNC Financial Services
