How Are Workers Preparing for Retirement?

By:  Tina Schackman, CFA®, Senior Retirement Plan Consultant

According to a 2021 Retirement Confidence Survey by the Employee Benefit Research Institute (EBRI), U.S. workers preparing for retirement vary by age but there are signs that savings habits are starting to take place earlier than previously reported. In fact, 48% of respondents between the ages of 25 and 34 reported having savings of $100,000 or more.

Starting to save early is one of the easiest ways to accumulate savings for retirement.

Of the 31% of respondents that stated they made changes to their retirement plan since January 1, 2020, more than half increased the amount they contribute.  A workplace retirement plan, such as a 401(k) or 403(b) plan, can help build retirement savings through tax-deferred savings and the potential for your company to match your contributions to the plan.  Check out our recent Summer Webinar Series “Retirement Accounts: Traditional vs. Roth” for typical ways to save for retirement.

What’s getting in the way of reaching savings goals?  Debt is the #1 reason, and it weighs heavier on workers who experienced loss of income or a job.  In fact, 70% feel debt is negatively impacting their ability to save for emergencies. Establishing and sticking to a budget can be a great way to get your finances under control and find more ways to save.  We recommend you watch the replay of “Connecting the Dots to Your Financial Future (Part 1)” to learn some budgeting tips and debt payment strategies.

Confidence is key! The majority of U.S. workers remain confident in their ability to live comfortably in retirement. 

Source: EBRI 2021 Retirement Confidence Survey (*1993 first year asked)

We wanted to provide a few tips to start creating healthy savings habits:

  1. Pay yourself first and start early.
  2. Don’t take on more debt than you can afford.
  3. Pay down credit cards as soon as you can.
  4. Understand your employer’s retirement plan.
  5. Create a budget and track expenses.
  6. Set financial goals and have a plan (start with a small goal that can be easily attained)

Contact BFSG if you’d like to learn more about developing your personal financial plan at financialplanning@bfsg.com.

Prepared by Broadridge Advisor Solutions. Copyright 2021. Edited by BFSG, LLC.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s web site or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.

Protecting Retirement Accounts From Bankruptcy and Creditors

COVID has impacted us all and unfortunately forced many individuals to be laid off or business owners to close their doors.  As relief runs out and with no further relief in sight it is expected that bankruptcy filings will increase in 2021. The good news is that there is protection for people’s retirement accounts, but the coverage varies depending on state law and the type of retirement account. This coverage means in the event of bankruptcy your retirement accounts are protected and can’t be touched by creditors.


401(k), 403(b), and 457 plans

Plans under Employment Retirement Income Security Act (ERISA) are protected from garnishment or levy from creditors. Retirement accounts under this protection include most 401(k), 403(b), and government 457 plans. Some types of 403(b) plans provided by government or churches may be exempt from ERISA.

Traditional IRA and Roth IRA accounts

Under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) creditor protection is provided for Traditional and Roth IRAs. The BAPCPA provides protection in the case of bankruptcy up to $1 million indexed for inflation ($1, 362,800).

Rollover IRA accounts

Under BAPCPA funds rolled over from a 401(k), 403(b), and government 457 plan accounts are completely protected, and the full amount is protected in bankruptcy

Inherited IRA accounts

Unfortunately, the Supreme Court has ruled that Inherited IRAs are not protected under BAPCPA in Clark v Rameker.

Creditor Protection

401(k), 403(b), and 457 plans (*that are ERISA plans)

Protection for retirement accounts can go beyond just bankruptcy. For ERISA plans they are fully protected just like bankruptcy EXCEPT for qualified domestic relation orders (QDRO) for divorce and IRS levies. Please be aware these protections apply to plans that are under ERISA and non-ERISA plans do not have the same protections.

Non-ERISA Accounts

There is no federal protection for Traditional IRA or Roth IRA. Instead, creditor protection is provided at the state level and varies. Each state has its own rules on creditor protection, and they can vary. On top of that, some states have different creditor rules for Traditional IRA and Roth IRA accounts.  For example, in California, a Roth IRA has no protection but in a Traditional IRA only the “amount necessary for support” is safe and the judge determines what this amount is. If you are doing a rollover an important consideration is if there is a potential need for creditor and bankruptcy protection. If this is the case keeping the assets in an ERISA plan is the best way to go.