Helping People Focus on Financial Planning in the New Year

Few people are making financial planning their top priority for 2020, Allianz Life found, but the firm's Kelly LaVigne offers suggestions for what plan sponsors can do to get employees focused.

A mere 14% of people include financial planning as a New Year’s resolution, down from 18% last year, a survey by Allianz Life found. When asked what their top focus for 2020 is, 51% said it is health and wellness. Only 27% said financial stability.

Kelly LaVigne, senior vice president of consumer insights at Allianz Life, says these findings show a disconnect in people’s thinking about their future: “People focus on health and wellness with the hopes of potentially living longer, but they aren’t setting themselves up financially for a longer life. We all want to live longer, but not many people are planning for how they will actually pay for it.”

The survey also found that only 27% said they are likely to seek the help of a financial professional, down from 31% in 2018 and 32% in 2017.

Asked what priorities people should set for themselves with regards to retirement planning, LaVigne tells PLANSPONSOR that the first one is to work with a financial adviser. “Never manage your retirement finances on your own,” he says. “Yes, there is plenty of information available on the web, and everybody thinks that is the way to do it, but you really need professional advice unless you are an expert on tax regulations and tax code changes. It is almost impossible for an individual to do it themselves.”

Secondly, LaVigne advocates working with an adviser to make sure you are getting all of the tax deductions available to you. Thirdly, for those who have retired before the age of 70-1/2, when required minimum distributions are required from 401(k)s and individual retirement accounts (IRAs), he advocates that people leave their money in those accounts until that age if they have other investment accounts. Using money from accounts where taxes have already been paid will lower one’s taxes, he says. Furthermore, he definitely recommends that people delay taking Social Security benefits until they reach full retirement age.

Thirdly, “for someone who wants to leave a legacy and has a substantial IRA account, they should consider a Roth conversion or a partial Roth conversion during this time when marginal tax rates are low.”

Aside from offering access to a financial adviser, LaVigne says that education is critical for plan sponsors to provide participants. “I would also like to see annuities being offered in qualified retirement plans,” he adds. “That is what plan sponsors need to look at.”