Parents love offering unsolicited advice to their kids. That truism has long persisted, spanning generations and cultures, often to the chagrin of their children. But before parents offer tried-and-true nuggets of wisdom—especially when it comes to financial planning—they should take a moment to make sure they’ve been following that guidance themselves.
Financial circumstances constantly shift and require optimizations, and it’s always important to take a moment for self-reflection. Studies suggest that, if the consistent increases in life expectancy persist, centenarians may be common by 2100. The reliable pensions of the past have largely vanished, replaced by a myriad of employer-sponsored retirement plans. Additionally, voluntary benefit insurance plans offered through your employer can provide benefits and support when unexpected events threaten your livelihood and savings.
This added complexity has increased the importance of financial advisors, who help their clients set financial goals and select the right mix of employer-sponsored products (in addition to any other investment options) to help make those goals reality.
Before parents tell their kids how they should plan for the future, they should be prepared with solid advice—advice they’ve incorporated into their own financial planning, regardless of which life stage they’re in. And parents should know that, even if they are behind on their own goals, there are still many options available to help them catch up.
So, much in the same vein as an erudite parent looking to dispense their wisdom, here are some suggestions for thinking about using your employer-sponsored retirement plan to craft a thriving financial future, to and through retirement.
Get the ball rolling
It has been said that 80% of success in life is showing up. The same principle applies for financial planning. The small first steps—learning the basics of the various investment options, picking up the phone to reach out to potential financial advisors, signing up for automatic retirement plan contributions— are often the ones that make the biggest difference long-term. No journey is complete without a destination. A first step: Consulting a retirement calculator, which can help you determine your ultimate goal.
Cognitive scientists and behavioral economists have long studied a phenomenon called the status quo bias—a cognitive bias that shows that most humans have a strong desire to stick to familiarity, even if the familiar leads to negative or suboptimal outcomes. One might recognize that opening and funding an IRA, or maxing out their employer’s 401(k) match, is in their best interests, but they’re impeded by the powerful force of inertia. Don’t fall in that trap. Recognize that it’s the cumulative effects of small changes and optimizations, that once implemented, may create significant benefits over time.
Don’t look a gift horse in the mouth
Especially when that gift horse is additional money making its way into your pocket. Many employers offer a variety of benefits that can be taken advantage of, like sponsored 401(k) or 403(b) plans. These plans offer a way for employees to invest pre-tax money in a myriad of investment options, giving them the potential to steadily grow their wealth over time.
Adjusted for inflation, the S&P 500 has delivered an average return of 7% annually since its inception in 1928—and with the power of compounding interest, those returns have the potential to be greater.¹ Even better, many employers match their employees’ 401(k) contributions up to a certain percentage of their salary, helping to accelerate those investment gains further. Taking advantage of these long-term investment vehicles is one of the most effective ways to build retirement income.
Alongside these retirement accounts, employers often provide access to a number of voluntary benefits, some of which are automatically included in benefit packages, and others that must be opted in to. From accident insurance to critical illness coverage, these products can be a powerful hedge against the unexpected events that inevitably arise in life. Depending on your coverage, potentially calamitous events can be turned into bumps in the road instead.
Time flies when you’re having fun
It’s remarkable how quickly time seems to pass in life. That’s why it’s important to balance the demands and comforts of the present with an eye on the future. Retirement comes faster than people think, and with it, a number of complex financial decisions about making golden-year plans attainable. Try to keep up, or catch up, with retirement contributions. You can, for example, max out the $18,500 limit on 401(k) contributions. (That limit increases another $6,000 a year if you’re over 50.) You can also opt in to voluntary benefits, which reduce the risk that an accident or sudden illness will derail your financial plans.
If you have kids, or have plans to have them, chances are they might want to attend college one day. And with the cost of college tuition skyrocketing, even adjusted for inflation, it’s never too early to think about how to pay for their education. Consider tax-advantaged options for investing in their future, helping ensure that you and your children will more effectively manage debt to pay for higher education.
The best things in life are free
In the end, all of these financial strategies are means to an end. In order to help avoid the stress and anxiety that can come with financial worries later in life, it is essential to put in the preparatory work now — starting by taking a deeper look at all of the benefits your company has to offer. Seeking out professional assistance from a company like Voya Financial — which serves approximately 14.3 million people and offers a myriad of retirement planning services, as well as advice regarding IRAs, college planning, and life insurance products — is one way to help ensure you are confident in your financial future.
Retirement should be a time for enjoying the things that really matter, such as family, friends, personal passions, and not worrying about money. To take full advantage of all of the opportunities that retirement presents, smart planning is of paramount importance. And that’s the kind of advice that’s worth passing on — and following.
This article was produced on behalf of Voya Financial by Quartz Creative and not by the Quartz editorial staff.
¹Standard & Poor’s 500 Index (S&P 500) is comprised of 500 stocks representing major U.S. industrial sectors. Performance figures are inclusive of dividends reinvested. S&P 500 is a registered service mark of The McGraw-Hill Companies, Inc.
These unmanaged indexes are not intended to represent specific mutual funds, Investors cannot invest directly in an index. Individual results may vary to management fees, transaction costs, and taxes. Performance figures do not take into account the fees and expenses of investing in mutual funds/variable products. Past performance is no guarantee of future results.
Investment adviser representatives and registered representatives of, and securities and investment advisory services offered through, Voya Financial Advisors, Inc. (member SIPC).
References to third-party organizations or companies, and/or their statistics, products, processes or services, is not an endorsement or warranty thereof by Voya or its affiliates.
This material is provided for general and educational purposes only; it is not intended to provide legal, tax or investment advice. All investments are subject to risk. We recommend that you consult an independent legal or financial advisor for specific advice about your individual situation.