As an Employee of Northern Light Health, you may have one or several retirement plans available to you to maximize your retirement savings. We'll attempt to cover the highlights in addition to the tips and tricks for each plan here, but for more information please refer to the summary plan description for each plan (available to you on your employee intranet page under Human Resources.) In the first section, we'll cover what each plan is, what are the key features to know, and the tips and tricks of the plan. In section #4, we'll cover strategies to use your plan savings as income when you retire from employment. Please note that since we're covering general features of each plan, there may be provisions directly related to your division that can be different than what is listed in this guide below. Refer to each plan's summary plan description available on the intranet for more information. Use the table of contents on the left if you want to skip directly to any section. A 457(b) Plan is a retirement plan for certain employees of non-government organizations. It's generally used a supplemental savings plan for employees that want to save more pre-tax funds into retirement accounts than what is allowed into their 403(b) or 401(k). Now that you know how to save in each of these plans, how should you consider investing in each of the plans? This is where many folks feel like this: If the investment side of the equation is giving you some trouble, read on to section 2 ~ Developing YOUR Investment Strategy.Tips & Tricks to Maximizing the Northern Light Health Retirement Plans
EMHS Retirement Partnership 403(b) Plan
WHAT IS IT?:
WHAT ARE THE FEATURES TO KNOW?:
TIPS AND TRICKS:
Affiliated Healthcare Systems Retirement Partnership 401(k) Plan
WHAT IS IT?:
WHAT ARE THE FEATURES TO KNOW?:
TIPS AND TRICKS:
EMHS Retirement Partnership Plan & Trust
WHAT IS IT?:
WHAT ARE THE FEATURES TO KNOW?:
The sum of your whole years of age & credited service as of 12/31 equals: Percentage Contribution by NLH: Less than 41 3% 41, but less than 51 4% 51, but less than 61 5% 61, but less than 71 6% 71, but less than 81 7% 81 or more 8% TIPS AND TRICKS:
Eastern Maine Healthcare Systems 457(b) PLAN
WHAT IS IT?:
WHAT ARE THE FEATURES TO KNOW?:
TIPS AND TRICKS:
Start by making a budget of necessary living costs (housing, utilities, car, groceries, medical insurance, etc.) that you could reasonably estimate but in today's dollars. Say that you think it might cost you approximately $80,000 in required living costs, but you want to also have another $20,000 in discretionary costs for items such as vacations and dining. Adding these two items together, you'd need $80,000 in living expenses, but would ideally like $100,000 to spend per year in today's dollars. Estimating any payments from Social Security and pensions from other employers or state governments will allow you to find your retirement foundation. For example, if you and your spouse each will receive a $25,000 social security benefit at age 67, you have a base of $50,000 income to consider for retirement. Taking the example in Step One further, if you need $100,000 per year and you're due to receive $50,000 in Social Security income, you now need to establish enough savings over your career to allow for $30,000 to $50,000 per year of expenses. We've recently written a blog post that can assist you on whether you're on the right path to that spending level. Check it out here!Developing YOUR Investment Strategy
I now know about how to save in the Northern Light Health retirement plans, but how should I invest in them?
Step One: Make an estimate at your realistic ideal for retirement income.
Step Two: How much of your retirement income will need to come from your retirement savings?
If you have fully funded your retirement income needs, then you may want to consider protecting your nest egg more against risk of loss, especially as you get closer to retirement. If you are not on pace for your retirement goal, then considering retiring a bit later than planned, increasing your savings into the retirement plan, and/or changing your investment strategy should be investigated.
You can also use the following retirement income calculators to get a bit more specific to your situation: this one from Vanguard, and this one from Dimensional Fund Advisors (DFA.)
Step Three: Measure your risk tolerance, your ability to save for retirement, and a target rate of return to achieve your goal.
Now that it's a bit more clear on what we're trying to accomplish, it's time to generate a plan for how we'll accomplish this goal. The first thing to measure is your willingness to accept risk and capacity to take risk. There's some simple tools out there you can use, including this one from Vanguard.com. The premise is that if you're not able to emotionally accept that there may be times that you can lose in stocks, then it might point you to investing in less risky investments such as bonds or cash. With less risky investments, your money may not grow by as much and with less speed. This may mean that you need to save more for retirement to make up any gains you sacrifice by being less risky.
Many financial planners suggest saving 10% to 15% of your pre-tax income into your retirement accounts to fully fund your retirement over time. The previously listed calculators can demonstrate to you the impact of saving at different percentages of your pay. However, you also do need to live for today, so carefully budgeting what you can afford to save is an important step to balance both today and your retirement.
Step Four: Invest!
Step Four is the part where most people just say "yeah, yeah, yeah" to Steps One through Three, and let's skip to Step Four. Unfortunately that can be a bit short-sighted like driving a car without knowing where you're going. Why would I invest funds if I haven't gone through the practice of goal-setting and knowing, albeit roughly, where I'm likely to be headed?
While many employees find the investing part fun, or confusing, or even difficult, our team finds that most employees don't really knowwhy they're investing.
The principle is to achieve the rate of return that allows you to meet or exceed your retirement income goals. You'll notice in the previous steps when using retirement calculators, they ask you for an assumed investment rate of return. This is where your investments come into place. If you need a 6% rate of return to achieve your retirement income goals, then you'll need to be aligning your investments to meet or exceed a 6% return goal over the course of your career.
So in what do I invest to achieve my goal rate of return? Unfortunately, it would not be prudent for us to provide you with broad investment advice since not all client needs and circ*mstances are the same. However, we're pleased to report to you that the Northern Light Health Investment Committee is doing a great job continuing to negotiate lower investment costs for your investment options and providing plenty of options available to you in these plans to craft a tailored investment strategy to achieve your investment goals.
Step Five: Can I do this all by myself?
The answer is that some people have what we like to call the "TWA" to be successful in saving for their retirement solo. "T" stands for time. Do you have the time to spend self-educating best practices and how to invest your funds? "W" stands for willingness. If you find mapping out the process and staying on top of your investable assets work and not fun, you might not have the willingness to do this work yourself. Lastly, "A" is for attitude. Over the course of your career, you'll need to have a steady attitude in order to not self-sabotage your retirement. Sticking to your plan and how you are investing in your plan will put you in a better position to succeed than making emotional decisions based on fear and greed.
But after reading all this information are you overwhelmed?
If you don't think you have the TWA to do this alone, you can always talk to a Fidelity & Bluefin representative that can assist in your plan. However, you may want to consider hiring a dedicated Financial Advisor to work with you. There's even Financial Advisors out there that can manage your money within the Northern Light Health retirement plans. Read chapter 3 for more information on how to do this!
The short answer is, "Yes!". This is a big deal. Why? Well, generally people don't have enough savings to hire a fiduciary Financial Advisor unless they are working with a broker that charges on a commission basis to the investor. By allowing a fiduciary advisor to manage your Northern Light Health retirement account, you may get access to more advanced services from a fiduciary Financial Advisor that you wouldn't otherwise receive (for example: robust financial planning, oversight of all your assets, estate planning discussions, risk and insurance assessments, etc.) How does this work? Within the Northern Light Health retirement plans on the Fidelity platform, one of the investment options is called a "Self-Directed Brokerage" program. There are a number of advisors in your local area who custody their clients' assets with Fidelity directly and are able to advise on clients assets in this Brokerage program. Guidance Point Advisors is one of these advisors. A few things to note about the Advisor working with the assets in this Brokerage program: In the medical profession, each physician takes the Hippocratic Oath or to “do no harm permanently.” In the legal profession, attorneys abide by the ethical rules of the jurisdiction they practice within, but what about your Financial Advisor? Financial advisors are held to one of two different standards depending on whether you are working with a fiduciary or a broker-dealer. While the title “Financial Advisor” may apply to both, there are differences that you should be aware of. The major distinction is whether your advisor is considered by the government as an investment advisoror an investment broker. Each is held to a different set of standards. See this link to learn more. The Fiduciary Standard applies to investment advisors while the Suitability rule applies to an investment broker. From Investopedia: Investment advisors, who are usually fee-based, are bound to a fiduciary standard that was established as part of the Investment Advisors Act of 1940. They can be regulated by the SEC or state securities regulators. The act is pretty specific in defining what a fiduciary means, and it stipulates that an advisor must place his or her interests below that of the client. It consists of a duty of loyalty and care, and simply means that the advisor must act in the best interest of his or her client. Broker-dealers only have to fulfill a suitability obligation which is defined as making recommendations that are consistent with the best interests of the underlying customer. Broker-dealers are regulated by the Financial Industry Regulatory Authority(FINRA) under standards that require them to make suitable recommendations to their clients. Instead of having to place his or her interests below that of the client, the suitability standard only details that the broker-dealer has to reasonably believe that any recommendations made are suitable for clients, in terms of the client's financial needs, objectives and unique circ*mstances. A key distinction in terms of loyalty is also important, in that a broker's duty is to the broker-dealer he or she works for, not necessarily the client served. This can quickly lead to advice that is filled with potential conflicts of interest, thus, it can be hard to trust the advice of a Financial Advisor working on a commission basis. Can you imagine if a medical professional or legal professional had a duty to the employer they worked for and not necessarily in the best interest of the patient or a client? Would joint replacements be done just because the physician needed more billable surgery and not because it was medically necessary? Terrifying. This is the very first thing to understand when searching for a Financial Advisor to hire. So fiduciary or broker? How do you, the consumer, start to figure out which standard your advisor is held to? It’s not easy. Many Financial Advisors can be both an investment advisor AND an investment broker so there may be sometimes when one applies the fiduciary standard and then in the same conversation or meeting applies the suitability standard. The easiest way to find this out is to start asking about how the Financial Advisor is paid, or simply follow the money! Here’s some questions to ask any potential Financial Advisor: At Guidance Point Advisors, our Investment Consultants adhere to the The Fiduciary Standard. We are all bound to put our clients needs above our own and it is something that we take very seriously not just because we have to, but because we want to. Is your current or future Financial Advisor putting your needs first? To find a list of Financial Advisors regulated by the U.S. Securities and Exchange Commission, check out our blog here that details this process step by step. After making your list of potential advisors from the information that you have gathered, start scheduling interviews. Make a list of questions and be sure to cover any concerns that you have. Don’t be afraid to ask a lot of questions, this is a job interview! Choosing a Financial Advisor is very personal. Everyone has different needs, and there is no "one size fits all" option. Whoever you choose, make sure that you do your homework. It's ok to be picky! If you’re going to trust someone to handle your nest egg, you want to make sure that you’re hiring the very best person for the job. You may want to also read our blog "Top 5 Problems with Financial Advisors and How to Solve Them" for more information. Getting past other differentiators, say you’re close to hiring your Financial Advisor, and you really can’t decide between the two as you equally like and agree with both firms / advisors. Then in this case, a decision can truly come down to price. This is where it can get pretty difficult. Where would you go to compare investment advisors’ fees? Unfortunately, there isn’t an Edmunds.com or Kelley Blue Book like when you’re buying a car that you can use to guide you to what an appropriate price would be. Also, advisor fees usually “wedding cake” or get cheaper the more investable assets you place with them. Below you can see 2016 Self-Reported Advisory Fees for Registered Investment Advisors by Client Asset Level. This comes from Cerulli’s RIA Marketplace 2016 study, Exhibit 3.15 A few things to help you read this table. First, the first column is listed as bps, or basis points. A basis point is 0.01%. 75 bps would be interpreted as 0.75%. The $100k client reads as a client that has $100,000 of investable assets, and the “M” stands for million ($1.5 million in investable assets). The percentages are the percentage of Registered Investment Advisory (RIA) firms that charge the fee level for the client segment. So 4% of RIA’s charge a fee of less than 0.75% for clients with less than $100,000 investable assets What are a few key takeaways from this table? A few caveats to pricing (aren’t there always?). There are very few resources, even to us as Financial Advisors, to benchmark prices and practices. These prices are based on asset based pricing, or fees that increase or decrease based on the level of assets that are placed with the advisor . Please note that this study is as of 2016 and probably won’t be updated in this blog post going forward, so pricing data is getting more stale by the day. It is important to know if there are other Financial Advisor fees involved such as commissions paid to the advisor, fixed fees, or fees for service. You certainly don’t want to receive a hidden fee later that was never discussed but probably was disclosed in account agreements, marketing brochures, or other disclosures. Our firm thinks in profitability based on the amount of time we’re spending with our clients, and our fees are reflective of that service level. A client that needs a higher or lower service level than proposed should be expected to impact the quoted fee. You can research more of our firms pricing with this link here. Ultimately, the Financial Advisor fee is a social agreement about what a reasonable price is for the services delivered and by whom its delivered. Why does no one talk about this? Well, knowledge is power. If you don’t know what the price truly is, if you don’t know what it should be, if you don’t know that the price can probably be negotiated then you accept what is given to you. Clients should be in control of what they pay from their nest egg and to whom. Isn’t it ironic that the role of the Financial Advisor is to help you take control over your finances and better educate you on your money, but may not have a truly open and honest conversation about fees? Many investment advisory firms are used to advisory fees at or above a 1.00% level and their practice and personal lifestyles are adjusted to these fees. Anecdotally from our personal experience, there’s a resistance to lowering fees within the industry as it means laying off support staff, downgrading office space and prestige, and worse case to the advisor – taking less pay. Maybe Financial Advisor fees will start to decline due to more awareness from clients and the client knowledge about the advisor’s fiduciary status. Will advisors just start cutting their product costs (using less expensive investments) to achieve goals and show the client cost savings? You can read more on this topic from our blog titled Financial Advisor Fees: Am I Paying Too Much? here.Hiring a Financial Advisor - Can One Manage Your Northern Light Retirement Account(s)?
Can a Financial Advisor manage my retirement assets in the Northern Light Health Retirement Plan without requiring me to leave my job or rollover my retirement plan savings?
I've decided I want to hire a Financial Advisor to help with my retirement accounts. First, you should understand the basics: Fiduciary vs. Suitability - What's the difference?
I've decided I want to hire a Financial Advisor to help with my retirement accounts. Second, How do I shop for and select the best Financial Advisor for me?
Are you considering hiring a Financial Advisor, but you don’t know how to get started? There are so many things to consider when hiring a Financial Advisor, but let’s start with the basics.
I've decided I want to hire a Financial Advisor to help with my retirement accounts. Third, what is the cost to hire a Financial Advisor and how do I know if I'm paying too much?
Below are some general things to know that are consistent for both the EMHS Retirement Partnership 403(b) Plan and Affiliated Healthcare Systems Retirement Partnership 401(k) Plan. Keep the following in mind:Getting Ready to Retire? What to consider!
Congratulations on your Retirement Decision! What are your options?
Many of our years of conversations with Northern Light Health employees have been focused on fear of "how does retirement work?", "how do I make sure I'm not making a mistake in retirement; I've never been retired before!?", and "am I really ready to retire?" I think most retirees don't want to make a mistake and fail, kind of like this poor cat!
What about my money in the EMHS Retirement Partnership Plan and Trust Agreement?
I also have money in the Eastern Maine Healthcare Systems 457(b) Plan? How do I take money from this plan?