Blog: Creating a Retirement Roadmap

It stands to reason that everyone would like a worry-free retirement. Along with financial security, common retirement goals include the ability to participate in lifelong hobbies or brand-new hobbies and spend time with family or travel. Although a successful retirement is widely desired, the steps to get together are unique for everyone – and so is the planning process.

To gauge retirement planning and confidence for employees and retirees across the country, the Employee Benefit Research Institute and Greenwald Research conducted the 2024 Retirement Confidence Survey (RCS) and published the results. [i] Among other things, the survey found that:

1. Retirement confidence is strongly related to a workplace retirement savings plan,
2. There is a desire to have assistance saving for emergencies through a retirement plan, and
3. Those who calculated their estimated retirement costs are likely to begin saving more than they did prior to crunching the numbers.

These results show that having an efficient savings infrastructure and strategy is key. However, the data suggests that, even though many people know what’s best for them, transforming knowledge into practice can be tough.

The Retirement Roadmap
While each employee's path to retirement is unique, there is an amazing opportunity to simplify retirement saving practices for any employee who is eligible to participate in a nonqualified deferred compensation plan (NQDCP). NQDCPs, which are employer sponsored savings plans offered to a select group of management or highly compensated employees, can be an invaluable resource when it comes to retirement planning needs. NQDCPs and 401(k) plans are both tax-advantaged deferred compensation plans, and they function in many of the same ways.

One key distinction between NQDCPs and 401(k) plans is access to funds prior to retirement. Under normal circumstances, 401(k) participants are not permitted to withdraw funds without penalty until age 59½ unless they experience a qualifying hardship or life event. Conversely, participants in NQDCPs can set up short-term distribution accounts known as flexible distribution accounts (FDAs) which are also known as “in-service” or “specified date” distribution accounts. Multiple FDAs can be set up and "laddered" in sequence to provide a distribution opportunity or re-deferral election annually. This attribute of NQDCPs allows participants to access their funds without penalty for any reason, even before age 59½, as long as their distribution elections are made in accordance with plan rules as governed by Internal Revenue Code Section 409A.

When it comes to calculating the cost of retirement and one's desire to save more after crunching the numbers, NQDCP participants can boost their retirement savings by taking advantage of any matching contributions offered by their employer. Much like a 401(k), employers can match contributions in an NQDCP. Any prudent retirement saver would be wise to take advantage of a matching opportunity offered by their employer.

Enjoy the Ride
Just like planning a road trip, the path to retirement may contain as many assumptions as unforeseen circumstances. As the RCS found, having a workplace retirement savings plan can help retirement savers start saving with confidence but anxiety about emergency spending and saving enough may also be present. For those who are eligible, an NQDCP is a very efficient way to address these concerns and taking advantage of a company match is an added benefit. The ability to receive distributions via penalty-free FDAs establishes NQDCPs as one of the preeminent resources for aspiring retirees to ensure their pathway to retirement is as smooth as it can be.

[i] Employee Benefit Research Institute (EBRI) and Greenwald Research. 2024 Retirement Confidence Survey. Retrieved from: https://www.ebri.org/docs/default-source/rcs/2024-rcs/2024-rcs-release-report.pdf?sfvrsn=2447072f_2