MONEY Retirement

POLL: Will You Save More for Retirement This Year?

large golden egg with coin slot
Joe Clark—Getty Images

Planning to really sock it away in 2015? Or, maybe you have other plans for your cash. Tell us about it.

MONEY retirement planning

The Right Way to Tap Income in Retirement

Ken and Jeanne Musolf
Peter Bohler Jeanne Musolf would like to join husband Ken in retirement in three to six years.

A couple working on their retirement plan needs help making the transition from saving to taking income. Here are three key steps to follow.

Over the past four decades, Ken Musolf, 63, has carefully plotted out an investment strategy for him and his wife, Jeanne, 59. His financial acumen has helped the couple accumulate $1.1 million in retirement funds.

Though Ken retired in 2012 after 35 years as a construction electrician, he and Jeanne have yet to tap that nest egg. He gets three pensions and Social Security, totaling $48,840 a year; and until December, she had been earning $100,000 as a department manager at a hospital. But they’ll need to start drawing down soon: Jeanne is scaling back her hours and job duties in January and plans to retire in three to six years.

Ken admits to being at a loss on this next phase: How do they transition from saving to taking income? With a portfolio across seven accounts that’s 66% stocks, 30% bonds, and 4% in cash, he says, “our quandary is that we have a basketful of investments and want to consolidate them in a sensible allocation that allows for growth and safety.”

Their only debt is a $43,000 home-equity loan and a $26,000 car loan. So the Musolfs have been living very comfortably on $8,500 a month, leaving them room to make extra debt payments, give $600 a month to charity, and splurge on their three grandkids. And Jeanne has been saving 20% of her pay in her 403(b). As she starts her new job, her salary will drop to $65,000.

The Musolfs can absorb that pay reduction and avoid dipping into their retirement funds by cutting back on overpayments on their mortgage and car loan, says Kay Allen of Aspen Wealth Management in Colleyville, Texas. The bigger challenge will be managing Jeanne’s retirement—when to quit and when to take Social Security—to minimize the impact on their portfolio. Depending on their choices, the couple could need to withdraw from $35,000 to $80,000 a year, Allen says. “The Musolfs are doing well,” she notes, “but it’s critical that they handle this transition carefully.”

The Advice

Reallocate to reduce risk: Ken can better manage their seven retirement accounts by consolidating them into four: one rollover IRA for each, Jeanne’s 403(b), and an IRA Jeanne inherited from her mother.

Next they should shift their allocation from a 66% stocks, 34% fixed-income mix to a 60%/40% mix. “This will enable them to better withstand market volatility,” says Allen. “At 60/40, they would have suffered a 22% loss during the Great Recession, requiring a 28% gain to catch up. With their current allocation, they’d have lost 30%, requiring a 43% gain. That is not something you want to experience in retirement!”

The mix she suggests (see illustration below) introduces shorter-term bonds for 12% of the portfolio via Vanguard Short Term Bond Index VANGUARD SHORT-TERM BOND INDEX INV VBISX -0.19% and 2% emerging-markets stock through Vanguard Emerging Market Index ­VANGUARD EMERGING MARKETS STOCK IDX INV VEIEX -0.11% for diversification. Allen also suggests always keeping a year’s living expenses in cash and four years’ in bonds to cushion against market turmoil.

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Money

Tally up expenses: To determine an income strategy, the Musolfs needed to figure out their retirement budget. If she retires before Medicare kicks in at 65, Jeanne will have to pay for health insurance ($1,000 a month). Allen also wants the Musolfs to get long-term-care insurance ($500 a month), plus a Medigap policy for Ken once he turns 65 ($175 a month). Since the Musolfs want to travel more, Allen helped them come up with an annual vacation budget of $15,000. All told, the couple will have $146,000 in yearly inflation-adjusted expenses if Jeanne retires at 62, or $127,000 if she waits till 65.

Strategize withdrawals and Social Security together: Normally, retirees are advised to draw down at a rate of no more than 4% the first year, adjusting only for inflation annually, for the best chances of portfolio longevity. But if Jeanne retires at 62 and doesn’t take Social Security right away, the couple will need to replace $85,000 in income, for a whopping 7.6% withdrawal.

So if Jeanne does want to retire on the early end, Allen suggests she take a check from the government immediately. The couple would then initially have to draw 5.5% to get the $61,000 they’d need. But that’s okay, says Allen—three years later Jeanne qualifies for Medicare and won’t need health insurance, so their withdrawal rate will fall to 3.4%.

This way their money should last at least to their life expectancies, with some left for heirs. “Jeanne is con­cerned about retiring—she wants to know if she really can do it,” says Allen. “If they follow these steps, the answer will definitely be yes.”

Read more Retirement Money Makeovers:
Married 20-somethings With $135,000 in Debt
Freelancers With a Toddler, No Plan, and No Cash to Spare
30 Years Old, and Already Falling Behind

Read next: Why You Should Think Twice Before Choosing a Roth IRA or Roth 401(k)

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MONEY retirement planning

How to Keep Risk From Draining Your Retirement Savings

Maurice Greer
Peter Bohler—Peter Bohler Maurice Greer wants to be on the final sprint to retirement.

An overly aggressive investing strategy threatened to derail Maurice Greer's retirement plans. Here's how he can get back on track without blowing his timeline.

Maurice Greer, 53, was a late starter in saving for retirement.

After a decade in the Air Force and eight years in retail—during which he’d saved $10,000 in a 401(k) but spent it when a sports injury threw him out of work—he de­cided in 2000 to start taking classes toward a certification in information technology. “I didn’t like the idea of getting old and having no money, so I had to catch up,” he says.

At age 40, newly minted with the tech credential, he moved to the Washington, D.C., area for an entry-level IT job with a Pentagon contractor. Thirteen years and five government jobs later, he earns $103,000 a year helping run the FBI’s computer systems. Along the way, he’s piled up $261,000 for retirement and $43,000 in the bank.

His aggressive investing style (80% in stocks) and savings plan (20% of pay) have brought him far. Now he wants to up the ante.

Greer, who has the government’s second-highest security clearance, has grown weary of the demands of the job, not to mention the polygraph tests and intrusive security checks the FBI requires. “My work is very stressful,” he says. “Life is short, and I want to enjoy it.” To travel more and pursue his photography passion, Greer wants to retire in seven to 10 years—the sooner the better.

In hopes of growing his money faster and making his dream a reality, Greer is considering buying individual stocks, perhaps big brand names like Coke and McDonald’s.

Investment adviser Riyad M. Said of TA Capital Management in Washington, D.C., doesn’t think that’s wise. With such a short time horizon, Greer should dial back (rather than crank up) the risk in his portfolio, Said says. “If he were 20 years from retirement, I’d say fine, stay aggressive,” he notes. “But when you’re seven to 10 years away, there’s a big risk that your portfolio could take a huge hit right when you want to take money out.”

The Advice

Reduce risk: Said suggests Greer turn down his equity exposure to 60% of his portfolio, with 40% in domestic and 20% in international funds. A quarter of Greer’s portfolio should go into fixed income, with 15% in U.S. bonds through MetWest Total Return METROPOLITAN WEST TOTAL RET BD M MWTRX -0.18% and 10% international through SPDR Barclays International Treasury Bond ETF SPDR SERIES TRUST BARCLAYS INTL TREAS BD ETF BWX -0.94% . Another 10% should go into alternatives—Said suggests Baron Real ­Estate Fund BARON REAL ESTATE RETAIL BREFX -0.11% and ­Alerian MLP ALPS ETF TRUST ALERIAN MLP ETF AMLP -1.51% —and 5% in cash.

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Money

Aim for a target: Greer’s ex­penses are modest: With a mortgage payment of $900 on his condo and no other debt, he spends only about $2,700 a month. At that rate, he’ll need $800,000 to retire in seven years or $730,000 to retire in 10, assuming that he takes Social Security at 63. To reach these goals, he will need to save $44,000 or $24,000 per year, respectively, based on a 6% to 6.5% average return.

Invest tax-efficiently: A disciplined saver, Greer sets aside $20,000 a year in his 401(k)—on which he gets a $2,000 match—and $10,000 a year in a savings account.

Rather than sock away so much in the bank, he should take full ­advantage of 401(k) catch-up provisions for those aged 50-plus to contribute a total of $24,000 a year to that account. Then he should put the remaining $6,000 in a new brokerage account invested in an index fund or ETF of dividend-paying stocks (the tax consequences will be modest, and he can reinvest the dividends). One option: PowerShares S&P 500 Low Volatility ETF POWERSHARES ETF II S&P 500 LOW VOLATILITY PORT SPLV -0.26% . These steps will let him save enough to retire in 10 years and get him started toward an earlier quit date.

Greer currently overpays $425 a month on his mortgage; if he stops doing that, he can free up $5,100 more a year. Additionally, he will earn his bachelor’s degree in cybersecurity soon, which would qualify him for positions that could increase his salary by 30%. Making a job change and putting all his extra earnings in the dividend fund should allow him to save enough to retire in seven years—though a new position could be more stressful than his current one. “If that would increase my chances of retiring early,” Greer says, “the trade­off would be well worth it.”

Read more Retirement Money Makeovers:
Married 20-somethings With $135,000 in Debt
Freelancers With a Toddler, No Plan, and No Cash to Spare
30 Years Old, and Already Falling Behind

MONEY Financial Planning

The Most Important Money Mistakes to Avoid

iStock

Smart people do silly things with money all the time, but some mistakes can be much worse than others.

We asked three of our experts what they consider to be the top money mistake to avoid, and here’s what they had to say.

Dan Caplinger
The most pernicious financial trap that millions of Americans fall into is getting into too much debt. Unfortunately, it’s easy to get exposed to debt at an early age, especially as the rise of student loans has made taking on debt a necessity for many students seeking a college education.

Yet it’s important to distinguish between different types of debt. Used responsibly, lower-interest debt like mortgages and subsidized student loans can actually be a good way to get financing, helping you build up a credit history and allowing you to achieve goals that would otherwise be out of reach. Yet even with this “good” debt, it’s important to match up your financing costs with your current or expected income, rather than simply assuming you’ll be able to pay it off when the time comes.

At the other end of the spectrum, high-cost financing like payday loans should be a method of last resort for borrowers, given their high fees. Even credit cards carry double-digit interest rates, making them a gold mine for issuing banks while making them difficult for cardholders to pay off once they start carrying a balance. The best solution is to be mindful of using debt and to save it for when you really need it.

Jason Hall
It may seem like no big deal, but cashing out your 401(k) early has major repercussions and leads you to have less money when you’ll need it most: in retirement.

According to a Fidelity Investments study, more than one-third of workers under 50 have cashed out a 401(k) at some point. Given an average balance of more than $14,000 for those in their 20s through 40s, we’re talking about a lot of retirement money that people are taking out far too early. Even $14,000 may seem like a relatively easy amount of money to “replace” in a retirement account, but the real cost is the lost opportunity to grow the money.

Think about it this way. If you cash out at 40 years old, you aren’t just taking out $14,000 — you’re taking away decades of potential compound growth:

Returns based on 7% annualized rate of return, which is below the 30-year stock market average.

As you can see, the early cash-out costs you dearly in future returns; the earlier you do it, the more ground you’ll have to make up to replace those lost returns. Don’t cash out when you change jobs. Instead, roll those funds over into your new employer’s 401(k) or an IRA to avoid any tax penalties, and let time do the hard work for you. You’ll need that $100,000 in retirement a lot more than you need $14,000 today.

Dan Dzombak
One of the biggest money mistakes you can make is going without health insurance.

While the monthly premiums can seem like a lot, you’re taking a massive risk with your health and finances by forgoing health insurance. Medical bills quickly add up, and if you have a serious injury, it may also mean you have to miss work, lowering your income when you most need it. These two factors, as well as the continuing rise in healthcare costs, are why a 2009 study from Harvard estimated that 62% of all personal bankruptcies stem from medical expenses.

Since then, we’ve seen the rollout of Obamacare, which signed up 10.3 million Americans through the health insurance marketplaces. Gallup estimated last year that Obamacare lowered the percentage of the adult population that’s uninsured to 13.4%. That’s the lowest level in years, yet it still represents a large number of people forgoing health insurance.

Lastly, as of 2014, not having health insurance is a big money mistake. For tax year 2014, if you didn’t have health insurance, there’s a fine of the higher of $95 or 1% of your income. For tax year 2015, the penalty jumps to the higher of $325 or 2% of your income. While there are some exemptions, if you are in a position to do so, get health insurance. Keep in mind that for low-income taxpayers, Obamacare includes subsidies to lower the monthly payments to help afford health insurance.

MONEY retirement planning

Money Makeover: Freelancers With a Toddler, No Plan, and No Cash to Spare

The Larsons
Peter Bohler With 30-plus years to retirement, David and Ashlene Larson can afford to take more investing risk.

Managing new businesses and a new baby left one young couple with little to save for retirement. Here's the advice they need to get their finances on track for the future.

David and Ashlene Larson know how important it is to save for retirement. The problem is they don’t have much cash to spare, as they are new parents—daughter Rosalie is 18 months—who are both starting new businesses. David, 33, took his sideline ­video-production company full-time in June, and Ashlene, 32, left her job at a PR firm in July to freelance.

The Larsons have more stable income than many self-employed workers, with $9,000 coming in monthly from two regular clients and twice that in a good month. But after payments for a mortgage, day care, car lease, and $25,000 in student loans—and after plowing some profits back into David’s growing business—they can put only $200 a month in Ashlene’s Roth IRA and $100 in a 529 savings plan for Rosalie’s college. Total savings rate: 3%. “It’s nerve-racking,” David says.

Meanwhile, they don’t know what to do with the $27,500 they’ve saved for retirement. Nor do they have any idea how to deploy the pile of savings bonds—worth $42,000 and earning 1.49%—that David’s grandparents gave him as a kid. “Our investments are all over the place,” says Ashlene.

Matt Morehead of Greenspring Wealth Management in Towson, Md., says that the Larsons’ overall allocation for retirement—73% stocks, 27% fixed income—is a tad conservative for their ages. But worse, Ashlene inadvertently has $15,000 in an old 401(k) invested in a 2025 target-date fund that will move to 50% bonds in 10 years, hampering its growth potential. Another concern: They have no cash in the bank. “The Larsons are stuck in the ‘foundation phase’ because they have debt and not enough emer­gency funds,” says Morehead. “They need to take care of those issues before sinking money into retirement.”

The Advice

Build in a shock absorber: Since they’re both self-employed, the Larsons should keep a reserve fund of at least nine months of expenses to prevent them from having to tap retirement funds if business slows, says Morehead. With basic costs of $6,000 a month, that’s $54,000.

David’s savings bonds are a good headstart, since these can be redeemed anytime without penalty—though taxes will drop their value to about $39,000. To make up the difference, the Larsons should redirect their $300 monthly retirement and college savings to a savings account. Plus, 40% of any monthly earnings over their base pay of $9,000 should go to the cash stash (another 35% to student loans, 25% to taxes).

Consolidate with the right target-date fund: David should open a Roth IRA for himself at a low-cost brokerage; Ashlene should move her accounts there too. Morehead suggests they go all in on Vanguard’s Target Retirement 2045 Fund time-stock symbol=VTIVX]. This bumps their stock stake to about 89% and gives them broad market exposure. Plus, the fund automatically rebalances until reaching a 50%/50% mix in 30 years. “This is a great way to invest for a young couple who don’t have time to monitor their portfolio,” Morehead says.

Beef up retirement savings: When their reserves are established, that 40% of additional income can go to their IRAs. Once they max out these regularly (each can put in $5,500 in 2015) or exceed the income limits ($193,000 modified AGI for couples filing jointly), Ashlene can open a SEP-IRA and David can start a 401(k). Only when they’re saving 15% of pay should they return to funding Rosalie’s 529. “You can always borrow for college,” says Morehead. “But you can’t borrow for retirement.”

Read more Money Makeovers:
Married 20-somethings with $135,000 in debt
4 kids, two jobs, and no time to plan
30 years old and already falling behind

MONEY alternative assets

How to Boost Returns When Interest Rates Totally Stink

People climbing over wall to greener yard
Mark Smith

With bond rates looking bare, income investors are eager to grab greener options. Higher payouts are out there, but watch your step: Some are riskier than others.

This is the first in a series of five articles looking at the most popular bond alternatives and the safest ways to use them to improve your income prospects when rates are low. Adapted from “Reaching for Yield” in the January/February issue of MONEY magazine.

Falling oil prices have sent shudders through the financial markets lately, but if you’re investing for income, this development could actually spell opportunity. Over the past few years, as rates shriveled on traditional bonds, yield-starved investors poured billions into higher-yielding alternatives, including dividend stocks, real estate investment trusts, energy partnerships, and new “go-anywhere” bond funds. That paid off handsomely if you got in early enough but has been problematic lately: All that money flooding in caused prices to rise sharply on bond alternatives, which sent yields plummeting. As a result, many of these securities by late last fall were paying out half as much as they usually do—or less.

That is, until recently. Jitters over what sharply declining energy prices might mean for the economy have ­prompted a rush back into government bonds and other “safe” securities. As a result, yields on some alternative assets are rising—and you can once again find payouts ranging from 4% to more than 6%, compared with the measly 1.9% rate on 10-year Treasuries.

To get to greener payouts, though, you have to climb a wall of risk. Historically, when market conditions turn sour, alternative assets lose more money, sometimes a lot more, than traditional fixed-income investments. That’s why financial advisers such as Mitch Reiner, chief operating officer of Capital ­Investment Advisers in Atlanta, recommend limiting the amount you invest in them to 5% to 25% of your portfolio, depending on how much income you need and whether you could let losses ride during market setbacks.

Also recognize that while these alternative assets can help boost your yield, the strategy isn’t a cure-all. Shifting 20% of a portfolio split fifty-fifty between stocks and traditional bonds into a mix of higher-paying alternatives might raise your yield from about 2% to 2.6% with little additional risk, says Geoff Considine, who runs the portfolio modeling firm Quantex. If you’re retired, that means you’ll still probably have to rely on principal and capital gains to fund at least some of your living expenses.

What follows is the first in a series of five articles looking at the most popular bond alternatives—in this case dividend stocks—and the safest ways to use them to improve your income prospects.

Dividend stocks: Go global and preferred

High-quality stocks that return a hefty portion of profits to shareholders via dividends are a favorite of income investors when bond yields are low. That’s been especially true over the past few years, when many blue-chip and even some tech companies were yielding as much as or more than Treasury bonds. The same payouts with real growth potential—slam dunk, right?

Not so much anymore. Yield-hungry investors have been bidding up prices on dividend payers since the financial crisis, and despite the market’s recent slide, they still look expensive relative to their earnings. For instance, the average stock in the SPDR S&P Dividend ETF, which tracks an index of companies that have boosted payouts consistently over the past 20 years, was recently selling at more than 18.6 times projected earnings. The price/earnings ratio for the Standard & Poor’s 500, which historically has commanded a higher multiple than slower-growth dividend stocks: about 16.

The more stock prices race ahead of earnings, the more likely they are to fall, warns James Stack, president of InvesTech Research of Whitefish, Mont.  “We are in the sixth year of a bull market,” he warns, adding: “A retirement portfolio can be destroyed reaching for yield.” And while high-dividend shares typically drop less than the average stock during downturns, their losses are still substantially more on average than you could expect with bonds.

Your best strategy: Rather than seeking out the highest yields, zero in on companies that consistently raise dividends. And don’t overpay. To avoid that, look for dividend payers overseas, where stocks have been less inflated than in the U.S.  A good option: PowerShares International Dividend Achievers ETF POWERSHARES INTERNATIONAL DIVIDEND ACHIEVERS PORTFOLIO PID -0.33% , a MONEY 50 pick that invests in foreign companies that have hiked dividends for at least five years straight. It paid out 3.9% over the last year yet has a modest average portfolio P/E of 14.

Preferred stocks offer even higher yields, recently averaging 6%. These shares can be traded like regular stocks but have more in common structurally with bonds: Their payments tend to be fixed over time, and their shareholders are ahead of common stock owners in the pecking order of whom companies must pay first. What you give up in exchange for that reliable income: a shot at much appreciation, because preferred shares, like bonds, have set redemption prices. And like bonds, preferreds are also sensitive to interest rates. If rates jumped, your shares could lose value, as they did in 2013.

Preferreds also lack diversification; almost 90% of them are issued by financial institutions. To reduce your exposure to banks, James Kinney, an adviser in central New Jersey, suggests splitting your preferred stake between iShares U.S. Preferred Stock ETF ISHARES TRUST U.S. PREFERRED STOCK ETF PFF 0.07% and Market Vectors Preferred Securities ex-Financials MARKET VECTORS ETF PFD SECS EX FINLS ETF PFXF -0.24% , which counts blue chips like United Technologies and Tyson Foods among its top holdings.

More in this series:
High-Yield Bonds: Where to Look for Quality Junk

MONEY Aging

Why Confidence May Be Your Biggest Financial Risk in Retirement

portrait of aging woman
F. Antolín Hernández—Getty Images

Seniors lose ability to sort out financial decisions but hold on to the confidence they can get it right.

You think it’s tough managing your 401(k) now, just wait until you are 80 and not quite as sharp as you once were—or still believe yourself to be.

Cognitive decline in humans is a fact. It starts before you are 30 but picks up speed around age 60. A slow decline in the ability to think clearly wasn’t an issue years ago, before the longevity revolution extended life expectancy beyond 90 years. But now we’re making key financial decisions way past our brain’s peak.

Managing a nest egg in old age is the most pressing area of financial concern, owing to the broad shift away from guaranteed-income traditional pensions and toward do-it-yourself 401(k) plans. Older people must consider complicated issues surrounding asset allocation and draw-down rates. They also must navigate an array of mundane decisions on things like budgets, tax management, and just choosing the right cable package. Some will have to vet fraudulent sales pitches.

About 15% of adults 65 and older have what’s called mild cognitive impairment—a condition characterized by memory problems well beyond those associated with normal aging. They are at clear risk of making poor money decisions, and this is usually clear to family who can intervene. Less clear is when normal decline becomes an issue. But it happens to almost everyone.

Normal age-related cognitive decline has a noticeable effect on financial decision making, the Center for Retirement Research at Boston College, finds in a new paper. Researchers have followed the same set of retirees since 1997 and documented their declining ability to think through issues. Despite measurable cognitive decline, however, these retirees (age 82 on average) demonstrated little loss of confidence in their knowledge of finance and almost no loss of confidence in their ability to manage their financial affairs.

Critically, the survey found, more than half who experience significant cognitive decline remain confident in their money know-how and continue to manage their finances rather than seek help from family or a professional adviser. “Older individuals… fail to recognize the detrimental effect of declining cognition and financial literacy on their decision-making ability,” the study concludes. “Given the increasing dependence of retirees on 401(k)/IRA savings, cognitive decline will likely have an increasingly significant adverse effect on the well-being of the elderly.”

Not everyone believes this is a disaster in the making. Practice and experience that come with age may offset much of the adverse impact from slipping brainpower, say researchers at the Columbia Business School. They acknowledge inevitable cognitive decline. But they conclude that much of its effect can be countered in later life if problems and decisions remain familiar. It’s mainly new territory—say mobile banking or peer-to-peer lending—that prove dangerously confusing.

In this view, elders may be just fine making their own financial decisions so long as terms and features don’t change much. They will be well served by experience and muscle memory—and helped further by smart, simplified options like target-date mutual funds and index funds as their main retirement account choices. The problem is that nothing ever really stays the same. Seniors who recognize the unfamiliar and seek trusted advice have a better shot at keeping their finances safe throughout retirement.

Read next: Why Your Employer May Be Your Best Financial Adviser

MONEY 401(k)s

Why Your Employer May Be Your Best Financial Adviser

150121_RET_ADVISOREMPLOYER
Thomas Barwick—Getty Images

Employers are offering more than 401(k) advice. They are adding financial wellness programs that help workers budget, save for a home, and more.

Large employers are taking on the roles of retirement adviser and financial educator in increasing numbers, new research shows. This is welcome news, because the federal government and our schools have not done a great job on this front, and individuals generally have not been able to manage well on their own.

Employers have been tiptoeing into retirement planning for workers for years as part of their 401(k) plan benefits. Typically, the advice has been offered in the form of printed materials and online informational websites. More recently, personalized advice has become available through call-in services and, in some cases, face-to-face meetings with planners arranged through work.

But what started as help with, say, settling on a contribution rate and choosing appropriate investment options has evolved into a more rounded service that may offer lessons in how to budget and save for college or a home. A breathtaking 93% of employers intend to beef up their efforts at helping workers achieve overall financial wellness in a way that goes beyond retirement issues, according to an Aon Hewitt survey.

This effort promises to fill a deep void. Just five states require a stand-alone personal finance course in high school, and just 13 require money management instruction as part of some other class. Meanwhile, the Social Security and pension safety net continues to grow threadbare. Someone has to take charge of our crisis in financial know-how.

Employers don’t relish this role. It comes with lots of questions about fiduciary duty and liabilities related to the advice that is proffered. Yet legal obstacles are slowly being cleared away to encourage more employer involvement, which is coming in part out of self interest. Financially fit workers are more productive and more engaged, research shows.

A company that offers a financial wellness benefit could save $3 for every $1 they spend on their programs, according to a Consumer Financial Protection Bureau report. These programs also reduce absenteeism and worker disability costs. That’s because money problems may cause stress that leads to ill health. So helping employees improve not just their retirement plan but their entire financial picture makes sense.

Among the upgrades most popular with employers, Aon found:

  • 69% offer online investment guidance, up from 56% last year, and 18% of the rest are very likely to add this feature in 2015.
  • 53% offer phone access to financial advisers, up from 35% last year.
  • 49% offer third-party investment advice, up from 44% last year.

Aon also found that 34% of employers have cut their 401(k) plan’s administrative and other costs, compared with just 27% a year ago. This echoes a BrightScope study, which found that employers generally are beefing up investment options while reducing fees in their 401(k) plans. In all, it seems employers are embracing their role as financial big brother—for their own good as well as the good of their workers.

MONEY Ask the Expert

How to Secure Your Finances When Reality Doesn’t Bite

Investing illustration
Robert A. Di Ieso, Jr.

Q: I am a 22-year-old college grad with a six-figure income and minimal student debt. I have no car and live with my parents. Is there something I should do now to lead a secure and fiscally responsible life? My father gave me the name of his planner but he was of little help — Timothy

A: Given your age, healthy salary, low expenses, and minimal debt, you’re financial situation is pretty straight forward. “There is a time and a place to work with a financial planner, and now may not be one of them,” says Maggie Kirchhoff, a certified financial planner with Wisdom Wealth Strategies in Denver.

If you still want some guidance, you may have better luck getting referrals from friends or colleagues. “A planner who’s a good fit for your parents may not be a good match for you,” she adds.

In the meantime, there are plenty of things you can be doing to improve your financial security. The biggest one: “Save systematically,” says Kirchhoff. If you start saving $5,500 a year, even with a conservative 5% annual return, you’ll have nearly $600,000 when you turn 60. “That assumes you never increase contributions,” she says.

It sounds like you’re in a position to save several times that amount now that your expenses are still low. Make use of your current economic sweet spot by taking full advantage of tax-friendly retirement vehicles, such as an employer-sponsored 401(k) plan. You can sock away up to $18,000 a year in such a plan, and any contributions are exempt from federal and state taxes. If your employer offers matching benefits, contribute at least enough to get the most you can from that benefit.

Your 401(k) plan likely offers an allocation tool to help you figure out the best mix of stocks and bonds for your time horizon and risk tolerance. Based on that recommendation, you’ll want to choose a handful of low-cost mutual funds or index funds that invest in companies of different sizes, in the United States and abroad. “You can make it as complicated or simple as you like,” says Kirchhoff.

If you want to keep things simple, look at whether your plan offers any target-date funds, which allocate assets based on the year you expect to retire (a bit of a guess at this point) and automatically make changes to that mix as that date nears. Caveat: Don’t overpay to put your retirement plan on autopilot; ideally the expense ratio should be less than 1%.

Now, just as important as investing for retirement is making sure you protect that nest egg from its biggest threat: you. Build an emergency fund so you won’t be tempted to dip into your long-term savings — and owe taxes and penalties — if you lose your job or face unexpected expenses.

“A general rule is three to six months of expenses, but since his expense are already so low, he should aim to eventually save three to six months of his take-home pay,” says Kirchhoff, who recommends keeping your rainy-day fund in a money market account that isn’t tied directly to your checking account.

With the extreme ends of your financial situation covered, you’ll then want to think about what you have planned for the next five or 10 years.

Is graduate school in your future? What about buying or renting a place of your own? Once you get up to speed on your retirement savings and emergency fund, you can turn your attention to saving up for any near-term goals.

You might also consider eventually opening a Roth IRA. You’ll make after-tax contributions, but the money will grow sans tax, and you won’t owe taxes when you withdraw for retirement down the road. (Note: You can save up to $5,500 a year in a Roth, but contributions phase out once your modified gross adjusted income reaches $116,000 to $131,000.)

A Roth may not only save you more in taxes down the road, it also offers a little more flexibility that most retirement accounts. For example, you can withdraw up to $10,000 for a first-time home purchase, without tax or penalty, if you’ve had the account at least five years. Likewise, you can withdraw contributions at any point, for any purpose.

What about the student debt? Depending on the interest rate and whether you qualify for a tax deduction (in your case probably not), you could hang onto it and focus on other financial priorities.

That said, if you can make large contributions to your 401(k) plan, build your emergency fund and pay off your student debt at a quicker pace, says Kirchhoff, so much the better.

TIME

This Is The Dumbest Reason You’re Losing Money

TIME.com stock photos Money Dollar Bills
Elizabeth Renstrom for TIME

Your inaction could cost you big

Interest rates might be low, but they’re not going to stay that way forever. And when they do rise, the chance to save a bundle will vanish. In spite of that, most Americans won’t take advantage of this window of opportunity.

A new survey from HSH.com, a site for comparing and calculating mortgage rates, finds that only 9% of Americans plan to refinance a mortgage this year, while only 30% say they’re going to pay off credit card debt.

This means we’re leaving money on the table in a big way. “Given that most credit cards are variable-rate, a rising interest rate environment would tend to be more costly over time, so there is even a greater benefit to retiring balances as quickly as possible,” says HSH.com vice president Keith Gumbinger. When the prime rate goes up, so will your monthly rate, even if you haven’t added to your overall balance.

“As far as mortgage refinancing goes, it’s a matter of opportunism,” Gumbinger says. “At the moment, fixed mortgage rates are at about 20-month lows, and very close to as much as 60-year lows.” While there are more variables to consider when refinancing, such as if your credit is good enough to qualify for the lowest rate, how much equity you have in your home and whether or not you plan to stay in that home for a while longer, Gumbinger says the opportunity for greater savings — and month-to-month cash flow — can make refinancing worth it under the right circumstances.

Even though Americans might be aware of their collective inertia when it comes to taking these steps, Gumbinger says the actual number of people who make a proactive improvement to their finances is likely to be low. “Even the best intentions are rarely realized, and over the course of the year there are likely to be many distractions,” he points out. For comparison, last year only 24% of us paid off credit card debt, although 15% did take advantage of low rates to refinance a mortgage.

Unfortunately, it’s not even like we’re socking away the money we do have for the future. The survey finds that only a third of Americans say they’re going to save for retirement this year. That’s an improvement from the 27% who say they did last year, but it’s still low.

“The calendar continues to work against you in the battle to amass assets,” Gumbinger warns. “Incomes are growing again, so if IRA [or] 401k contributions have been on the minimal side over the last few years, here’s a bit of a chance to play catch-up.”

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