Data & Research February 21, 2017

Parents and Grandparents Prioritize Children’s Well-Being, Retirement

They are forgoing frills to raise their children and save for retirement.
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Parents and grandparents are keeping their sights on their retirement needs as well as raising their children—and to do so, they are willing to forgo treating themselves to life’s little luxuries, according to the TD Ameritrade Parents and Grandparents Retirement Survey.

Only 20% of Boomer grandparents and 12% of Millennial parents are willing to spend less on their children. Just 15% of parents would be willing to have fewer children.

These priorities come with personal trade-offs. Forty-nine percent of parents and 54% of grandparents think it makes sense to live a simpler lifestyle—and 36% of parents and 32% of parents would delay retirement—in order to ensure they have enough retirement savings to support themselves.

Forty-six percent of parents and 49% of grandparents would cut back on eating out and entertainment. Thirty-nine percent of parents and 45% of grandparents are open to buying a used car, 29% of both generations would cut back on vacations, and 36% of parents and 32% of grandparents would live in a smaller home.

“It’s encouraging to see that both generations of parents recognize there are trade-offs and are willing to make them in order to keep their retirement plan on track,” says Matthew Sadowsky, director of retirement at TD Ameritrade. “But it can be easier said than done, and to put this into practice, parents should take a hard look at what they’re truly comfortable scaling back on, if need be.”

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Sixty percent of parents and 52% of grandparents have dipped into their retirement savings to help their family out. The reasons why have been for emergencies (20% of parents and 24% of grandparents), household bills (16% and 17%), medical expenses (13% and 11%), and vacations (10% and 4%).

“Tapping into retirement accounts early can put your retirement at risk, and for those parents serving as the ‘family bank,’ this could negatively impact the whole family,” Sadowsky says. “Retirement saveres are able to stay the course and stay disciplined by taking a few fundamental steps, including: setting aside an emergency fund so they don’t need to tap into their retirement nest egg and developing a clear financial plan that can help protect and potentially grow their nest egg. People with a financial plan are three times as likely to be confident they will reach their retirement goals.”

The survey also found that parents who are saving for retirement have an average account balance of $79,000, while grandparents have $338,000. One-third of both generations are confident they will reach their retirement savings goal.

Head Solutions Group conducted the online survey of 2,018 adults in October for TD Ameritrade. The full survey can be downloaded here.

Products February 21, 2017

Groom Solution Makes Up for Loss of Determination Letter Program

Groom has developed its Document Compliance Service (DCS) for individually designed plans that have current IRS determination letters.
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Groom Law Group announced it will offer plan sponsors a practical solution for maintaining Internal Revenue Service (IRS)-compliant retirement plan documents now that the IRS is no longer issuing periodic determination letters.

The IRS ended its five-year determination letter cycle for individually designed plans. Groom says the abrupt pullback of this 60-year-old IRS program calls for a new approach for employers to maintain the tax-qualification of their plan documents. Such IRS qualification is essential to preserve fully tax-deductible employer contributions and pre-tax participant contributions; tax exemption for trust investment earnings; and tax deferral and rollovers for employees.

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Groom has developed its Document Compliance Service (DCS) for individually designed plans that have current IRS determination letters. The service builds on a plan’s last determination letter from the IRS, the IRS’ new “required amendment” lists and Groom’s extensive and continuous monitoring of legal developments as they arise. The end result of this effort will be an opinion intended to confirm continued satisfaction of the IRS document requirements applicable to an employer’s plan(s).

“We have designed this program recognizing that the IRS has emphasized the importance of an opinion of legal counsel for individually designed plans as we go forward,” David Levine, with Groom Law Group, Chartered, tells PLANADVISER.

DCS is available for tax-qualified plans of all types, including pension, cash balance, pension equity, profit sharing, 401(k), employee stock ownership plans (ESOPs) and money purchase pension plans. And all types of plan sponsors may take advantage of the service, including corporate, tax-exempt, governmental and other entities.

Without updated determination letters, plan sponsors and fiduciaries may still need documentation of IRS plan qualification to satisfy requests from plan auditors, compliance officers, investment managers and third-party administrators, among others.

Groom designed DCS to serve as a key internal control for an organization’s plans, and to help avoid costly IRS plan document corrections. DCS also is expected to be available to support merger and acquisition activities.

“We have designed this program to assist plan sponsors and their service providers with coming up with practical solutions that allow them to represent to investment managers and courts of law that their plans satisfy the IRS qualification requirements,” Levine adds.

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