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by Stephen Parezo

Troy Patton

September 12, 2005—Fiducial held two planning seminars last week highlighting the importance of employer-sponsored 401(k) retirement plans during National 401(k) Day. Nationally, there has been only a slight improvement in U.S. employees’ 401(k) participation rates, plan balances and diversification efforts, according to a recent study by Hewitt Associates.

Perhaps that’s part of the impetus behind the U.S. Department of Labor disclosure that it will propose measures by year’s end to encourage companies to automatically enroll their workers in 401(k) plans. The regulation could affect millions of workers in 450,000 retirement plans.

Troy Patton, Fiducial’s director of financial services, conducted the seminars online from his office in Indianapolis. He discussed how much these retirement plans will cost, reaching your retirement goal, investment vehicles and asset categories, building your portfolio and getting started.

“Retirement is the ability to achieve financial independence once you stop working,” said Patton.

Many employees are just not aware of how much money they will need for retirement let alone how to plan to reach that target. One of the Fiducial employees considering enrolling in the 401(k) admitted that she was at a point in her life where she needs financial security.

“I have been able to save a little money but I know it won’t be enough to secure my future,” said the employee. There were opportunities to enroll in a 401(k) at other jobs but she failed to do so “because no one took the time to explain things in a way I was able understand what was being offered.”

Although the employee says she doesn’t have that long to go before being forced to retire, she’s worried that if she starts saving now that there won’t be enough time to reach her goals unless her investments are high risk.

“I can’t afford to invest too much of my salary because of my expenses,” she said.

Fiducial has an entire support network of investment advisors for its plan that’s available through OppenheimerFunds. Oppenheimer is one of the most recognized names in the industry, offering a broad range of mutual funds covering the risk/reward spectrum. They have long-standing partnerships with financial advisors and financial planners nationwide.

Saving money tax-deferred

Experts maintain that today’s workers will probably need 80% of their pre-retirement income for each year in retirement. This income comes from Social Security benefits, personal savings, working longer and having a retirement plan.

Saving money tax deferred is an important benefit to these plans, says David Lush, an Indianapolis-based financial advisor with Fiducial.

“Another benefit is that these dollars can go with you throughout your employment career and, on average, it only costs you around $.70 for every dollar saved because of the taxes’ effect on your paycheck,” said Lush.

For some employees, it may not be quite the right time to enroll in a 401(k) especially for those who can’t afford to pay their bills. Still, advisors maintain that if you are like the average person with some debt, you should look at how much you can afford remembering that it will still only cost you about $.70 for every dollar contributed.

Every investment avenue contains an element of risk and dealing with risk plays a key role in the 401(k) equation. Employees can’t avoid risk but Patton says that they can manage it through selecting the right type of mutual funds, dollar cost averaging and asset allocation.

“Over 90% of a portfolio has a direct correlation to asset allocation,” he said. “That’s more important than picking the right stocks. If not, you’ll have a lot of ebbs and flows in the portfolio which may reduce your return.”

While everyone wants to retire someday, Fiducial advisors noted that if you do not save it probably will not happen. Indeed, for the cost of a couple gallons of gas or a few movie rentals, employees can enroll in a 401(k) and deductions can be automatically deducted from their paycheck.

“Every dollar put away is a dollar more you have in the end,” Lush said. “They can contribute as little as $10 a paycheck—every little bit helps.”

Stephen Parezo is the Media Manager for Fiducial.

Whatever your small business needs, your Fiducial tax and financial professional can analyze your situation and recommend an appropriate action plan. To locate a Fiducial office nearest you on fiducial.com, see the Zip Code Locator located in the upper right hand corner of the page. Do you have a particular topic that we should be writing about that can help your business? Please send your suggestions to: stephen.parezo@fiducial.com.

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