Are You “Mad” At Your 401K

Posted on August 28, 2012. Filed under: Uncategorized | Tags: , , , , , , , , |

As a company we like to keep things lite in the office given the nature of our work so from time to time we follow Jim Cramer. I mean this guy is great entertainment, and always good for a few laughs. One of his recent rants on Mad Money was about the so called scam of 401k’s. (here is the link to the article ).

After reading the article, mad man Cramer does make a couple of valid points, that most company plans are not that great given the high fees, administration costs, and sometimes bad choices for investments. However he is quick to point out the tax benefits and possibility of free money from a company match. His suggestion is to contribute to the 401k plan until the company match is maxed out and then make contributions to an IRA where you have greater flexibility with the investment choices.

This sounds great and is fundamentally correct but Mr. Mad Man forgets that most participants in 401k plans will never achieve maxing out the company match let alone funding a separate IRA. But let’s play along with Cramer’s suggestion and the participant is maxing out the company match and starts contributing to an IRA, how many of them will know what to buy in the IRA? His suggestion is dividend paying stocks, again great point but the average American will not do this.

Here is our suggestion, if you are an advisor that works with 401k plans you have the opportunity to bring tremendous value to your client by showing them that you can provide every participant with specific unbiased advice for their 401k plan and also be available for expert advice on outside investments like an IRA. Maybe this time people should really listen to Cramer because in this instance the Mad Man is not too far off.

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Retirement Programs Keep Employers on Track

Posted on June 25, 2012. Filed under: Uncategorized | Tags: , , , , , |

By Gail Belsky

There are many reasons for companies to offer a robust employee retirement savings program—it’s good for recruitment, for retention and for the future well-being of employees.

But what a firm provides, how it’s structured and how the options are communicated to workers depends on the company’s business strategies.

Firms with high turnover and lower-paying positions, for instance, might not be as aggressive as companies in more competitive industries or ones that are looking to retire employees at eligibility to make room for a new generation, according to Alison Borland, vice president of retirement strategy and product development at Aon Hewitt.
For companies that are looking to ensure their employees are prepared for retirement, it requires more than handing over a brochure explaining 401(k) plans and paperwork for their signature.

There are two things HR directors can do to give their employees their best shot at retirement readiness—offer a 401(k) plan with auto-enrollment and auto-escalation features, and develop a comprehensive, hire-to-retire program for financial literacy.
Both are sorely needed, according to a 2012 Deloitte survey of 430 plan sponsors, 84 percent said that only some or a very few employees would be financially prepared to retire.

Given what workers are up against—personal debt, rising healthcare costs, lack of personal savings—it’s not surprising. Most retirement programs aren’t making enough of a dent, but experts point to certain changes that can make a big difference.

Go on auto, but raise the default rate .

Auto-enrollment is a great start to getting employees into savings mode, and 56 percent of 401k plans now feature it, according to the Deloitte study. And on one level, they’ve been highly successful.

Participation is around 90 percent, compared to 70 percent with traditional ones, according to pension and retirement expert Robert Clark, a professor at Poole College of Management at North Carolina State University.

“Traditional 401(k) plans leave workers out unless they choose to be in. They also specify the rate of contribution and where to put the money,” says Clark. With auto-enrollment, employers take charge—automatically enrolling new hires, setting the rate of contribution, and putting the money into a specified account.

“The money stays there until the employee chooses to move it,” says Clark. “Basically, you’re in, and you have to opt out.”

The problem comes when the contribution rate is too low. At the typical default rate of 3 percent, auto-employment doesn’t make enough of a difference. Employees need to save 11 percent to 15 percent a year in order to replace 80 percent of their income after retirement, but when they start off low, they tend to stay there, according to Aon Hewitt’s Borland.

“When the automatic approach gets them on the track, they stay on that track, and they don’t save enough,” Borland says.

Companies need to set much higher default rates of 6 percent or 8 percent, and match at those levels, says Borland. And to reach the ultimate goal of at least 11 percent, they’ve got to escalate the rate by 1 percent a year. Auto-escalation combats the inertia employees have when it comes to raising their rate of savings, say analysts.

Another way to grow savings at a healthy rate is to make the default account a target-date fund, rather than a money market fund, according to Clark.

“This tracks the typical advice given by financial advisors to move from aggressive investments to less risky ones as you age,” Clark says. “You start out with 80 percent in equities, which declines to 30 percent to 40 percent and the rest goes into safer investments like bonds.”

Promote financial literacy—early

You can automatically enroll and escalate, but without the buy-in and involvement of employees, your plan will never be as effective as it could—or should be—according to Luke Vandermillen, vice president, retirement and investor services, at the Principal Financial Group. “It starts with the fact that most people haven’t taken the time to calculate how much they need to be saving for retirement,” he says.

The most successful education and communications programs offer simple ways for employees to understand and act on opportunities. Interactive websites, smartphone apps, and text-messaging all make the process more accessible—particularly to younger employees, who are less likely to participate in workshops or respond to phone prompts.

“You want to start automating as many features as possible to make it easy for employees to start at an early age,” says Vandermillen. “One-on-one meetings also generate better results.”

The fact that companies often wait until employees are nearing retirement eligibility to start education programs is another big problem; by then, it’s too late to accumulate the savings necessary to cover income.

“Companies should be pointing young workers in the right direction, even to the point of how to pick a financial planner,” says Carl Van Horn, an expert on human resources and employment issues, and director of the John J. Heldrich Center for Workforce Development at Rutgers University.

Fears of fiduciary responsibility—being responsible and possibly liable for decisions— have long kept employers out of the business of offering financial advice, but that’s been slowly changing, with 39 percent of companies offering some level of guidance, according to Borland.

New Labor Department regulations may also ease the constraints of fiduciary responsibility—paving the way for companies to bring in outside financial planners to advise employees on investment strategies.

Meanwhile, advisors can explain the options and issues in general terms. Instituting monthly financial-education meetings is ideal, according to Bill Chetney, executive vice president of LPL Financial Retirement Partners in San Diego, which trains retirement advisors.

“It creates a kind of worksite financial-literacy program for people to participate in over the years,” Chetney says. “It doesn’t start five years before retirement … it happens in little bites over decades.”

And can keep both employees — and employers — on track.

Our question to you is why not have the best of both worlds? RJ20 can guide your plan participants to a successful retirement strategy and do it in an extremely cost effective way.

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To Roth Or Not To Roth Part 2

Posted on April 11, 2012. Filed under: For Individuals | Tags: , , , , , , , , , , , , , |

As mentioned in the previous blog we want to help people understand the difference between a Traditional 401k and the Roth 401k feature that is available in many plans today. Many of you might be saying sure go ahead and explain it but my 401k is not worth half of what it was, so it doesn’t really matter to me. I will argue that even though you may have half of your old account value, what is left and more importantly what will continue to be contributed is still very important. The choice between the two could mean a huge difference in your future income while in retirement. So instead of boring you with a ton of useless jargon we will get right to the point by listing out the main differences.


Traditional 401k

Money is contributed before you pay taxes

Earnings in your account are tax-deferred

Employer match is pre-tax

Mandatory withdrawals


Roth 401k

Money is contributed after you pay taxes

Earnings in your account are tax-free  (subject to age 59 ½ and 5yrs of account ownership)

Employer match is still made pre-tax but placed in a separate account for tax purposes

NO mandatory withdrawals


You may be asking yourself ok great, so now I know that I can put money in my account either before tax or after tax, so which one is right for me? This is a great question and one that we will address in the next blog. As for now we hope this helped a little and stay tuned for the next post in this series.

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You Can Lead A Horse To Water

Posted on April 10, 2012. Filed under: For Individuals | Tags: , , , , , , , , , , , , |

At RJ20 we pride ourselves in being a different kind of financial firm. Most if not all of our counterparts have the clear blue waters of the ocean or a spectacular mountain lake home on their website representing the wealth their clients have. Not us, we are working class guys & gals that know how hard it is to earn and keep a dollar. So, why the opening of this blog with a little jab at other financial companies, simple we are the financial how to video you are looking for on YouTube. What I am getting at is this, I recently read a blog about a gentleman that had a car problem and instead of taking it to a mechanic (aka a wealth management firm) he researched his problem on YouTube and found a video showing him how to fix it himself. Once he watched the video he knew exactly what he needed to do. He then went to the auto parts store and purchased the parts needed to fix the problem. I think it is fantastic that he was able to handle it himself and I firmly believe that more people need to take this approach with their 401k/investments. I equate RJ20 to the auto parts store in the above mentioned story. You have to have the correct parts to fix the job, but you can do it yourself and save a lot of money. So why not get the correct parts with the instructions included and fix the issue yourself? Seems simple to me, I mean you have to buy the parts anyway, right? That is where we (RJ20) come in, we can give you the parts, we can give you the how to video and in the end you can save a lot of money. There is one caveat, you have to want to watch the video and implement the fix yourself.

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The Next Generation

Posted on March 28, 2012. Filed under: For Individuals | Tags: , , , , , , , , |

According to Scottrade’s sixth annual American retirement study 51% of survey respondents reported starting their retirement savings in the age range of 25-34 compared with 39% last year. So what does this mean, well a few things. Number one younger American workers are realizing that it is time in the market, not timing the market. Number  two, given all of the noise around social security and its issues, younger workers are taking notice and making the choices now to insure they have the resources in place for a proper future.

The real question is how these Gen Xers will make the proper choices in their retirement plans to optimize their investment earning capabilities. We feel there is going to be a huge paradigm shift in the way this group and all future groups view and use their 401k plans. A lot of the clients we run across do not care about all of the fancy metrics or industry jargon used to impress, they just want to know what they need to buy now and what kind of outcome they can expect in the future. They also want to know that the advice is completely independent, objective and pertains to their specific goals not broad based general guidelines.

The things we have to remember as professionals and especially the “wealth managers” is that in the very near future these Gen Xers who have 10k in their 401k will be ones with sizeable assets that most advisors will be chasing, so I ask you what can you do to insure they view you as a trusted resource now and in the future, perhaps get them the advice they need now in their DC plan?

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Feather or Sledgehammer?

Posted on February 13, 2012. Filed under: Uncategorized | Tags: , , , , , , , |

RJ20 has always been able to help with performance, future participant tort liability and increased contributions but some of this is very difficult to track in the short term, and sometimes sponsors want even more. They occasionally desire to combine our on-line capabilities with additional hands-on, proactive, personal solutions to ensure participants maximize their 401k benefits. Companies realize a high percentage of their workforce may have much broader financial issues (e.g. funding tuitions, foreclosures, managing their cash flow, understanding credit and making overall smarter financial decisions) which negatively impacts worker productivity. Reducing financial stress is a key part of any financial wellness program today!

Our Solution!

At RJ20, we pride ourselves on our reputation as true problem solvers! Given the above, we have recently created a new and unique employee wellness module, powered by The LFE Institute, to tackle all of these issues head on. We’re not looking to make things a little better; we truly solve problems. “Why slap them on the wrist with feather when you can belt them over the head with a sledgehammer.”(Katharine Hepburn).
In addition to our historical offerings, RJ20 can now provide employees with unbiased financial wellness education and much-needed unbiased proactive 401(k) retirement advice. LFE’s expertise is building life-changing skills that help employees free up more money to invest. RJ20 then advises them on how to build a solid plan, and provides the support they need to make smart investment decisions and accumulate a substantial retirement nest egg.
RJ20 Employee Wellness Key Benefits:
• An interactive, skills-based financial curriculum that has been successfully taught to employees throughout the U.S. since 1986! Over 25 years of empirical data and demonstrable results.

• “Managing Your Money!” workshop has helped a half million employees stretch their paychecks, reduce their debts, ease family conflicts over money, and avoid costly financial traps and pitfalls. On average, employees find $4,000 – $7,000 extra each year – all using this unique alternative to budgeting!

• Recent plans have seen 401(k) Participation rates jump by as much as 27% when implementing this Employee Wellness Program.

• Extra money found facilitates much higher contribution rates. On average, $2,000 of additional contributions per participant annually.

• RJ20 still takes full ownership and control of this service delivery for you and your client for total quality control. We are not outsourcing this and hoping for the best. The buck stops with us, and that’s why our clients love our attitude toward service as we have “skin in the game.”


Our online planning solutions are focused 100% on the participant. We provide specific investment advice (not broader education) relevant to each participant’s risk tolerance, needs and goals. We tell participants whether they are on-track for their desired retirement, when even “worst case” assumptions are used. RJ20 technology is leading edge, easy to use and is clearly differentiated from the competition in its breadth and cost. It is one thing to ask basic questions about age and risk tolerance, and another thing altogether to provide participants with a roadmap to (and through) retirement. We do the latter! The advice is holistic and can incorporate all elements of a participant’s financial picture (beyond just their 401k), if desired.

There are many things which distinguish our offerings, including the low cost, unlimited CFP support, ease of use and the nature of our future participant tort liability shift. However, the single most important issue is our overall utilization rates run in the 30-60% range. This is purportedly more than 10X the experience demonstrated by the emerald lines up in Boston. RJ20 proactively encourages and facilitates contact. If your current planning tools aren’t used, your clients aren’t benefiting from the documented better performance (often 1.5% – 3% annually), or the planning piece of mind. A benefit is only a benefit if it is actually used. Our solutions are utilized!

Adding RJ20 into the solutions mix can:

• Broaden your reach; provide an additional arrow in the quiver to allow you to reach more existing participants, and bid on even larger new deals.

• Greatly improve planning utilization amongst participants.

• Give many participants a more desirous means of accessing planning solutions (surveys indicate around 30% of your participants prefer online options).

• Allow you the most economic (time and money) access to the likes of road warriors, expats, remote office employees, retirees, home office workers, third shifters, etc. RJ20 can improve Advisor and Sponsor bottom lines through the more efficient allocation of resources and improved employee processes.

• Improve plan investment returns!

• Shift future tort liability, and

• Greatly differentiate your offerings in the marketplace today.


Independent from our new wellness program, RJ20’s basic package only costs $15/participant annually. This translates to just $3000 a year for a 200 person plan.

Depending on the employee wellness option chosen, this module adds an incremental $5-$15/Participant annually. The all-in, top tier package costs only $30/participant annually. This usually translates to only 4-16BPs. There is no long term contract, if we don’t deliver on our promises, you won’t renew!

As part of our bundled solution, the entire cost can be paid out of plan assets! Additionally, if your client has a Wellness budget, that pool may now help fund your 401k enhancements.


Beyond the planning benefits to participants, we also benefit advisors and sponsors by shifting future Participant tort liability to us. This is a responsibility RJ20 takes on willingly and acknowledges in writing in the first paragraph of our contract. We assume 3(21)(a)(ii) future Participant tort liability for all active covered Participants (with online access) versus just users of our solutions. RJ20 effectively owns the ERISA liability for all active Participants once the contract is paid, and we’ve communicated our solutions. We thus have a very strong incentive to encourage full utilization.

To learn more about our solutions schedule a webinar with RJ20. Just shoot me back an email and we’ll set it up. Additionally, if you desire customized one page additions for your pitch books, just let me know.

Matthew Craig,
SVP – Sales, RJ20

The LFE Institute has helped well over 500,000 employees nationally improve their money sense. They’ve helped employees “find” thousands of extra dollars to invest each year. After completing LFE’s intensive Certification Process, their independent instructors and money coaches are able to generate the specific results corporations are looking for, and to provide the Financial Education employees need so desperately today. We are proud to have LFE power our wellness program at a significant discount to their own pricing.

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