Having enough money for life after pharmacy is a growing challenge for many community pharmacists and their retirement plan is a key part of that challenge.
The amount a community pharmacist can typically save for retirement depends, in part, on the retirement plan being used. With that said, there have been numerous articles written recently about the impact of certain aspects of company sponsored retirement plans for business owners and the risk associated with having these retirement plans.
For example, in one of the articles, a business owner had worked with a broker for over 10 years but, when the new fee disclosure rules came out and the fees were disclosed, the relationship ended. So, it's important to understand these aspects of your retirement plan.
The three most important things you need to ask yourself as a community pharmacy owner, when it comes to your retirement plan, are follows:
1. What is my fiduciary responsibility and liability? You, as the owner, have fiduciary responsibility and liability. A 401(k) plan and/or profit-sharing plan is a trust and there are rules and guidelines you must adhere to when you manage assets in a trust for other people. You must first understand what it takes to follow these rules and guidelines. You then need to put a process in place that not only ensures you take the critical steps needed to meet your fiduciary responsibility and minimize your liability, you also need to record what you did and how it was done.
2. How do I uncover the fees associated with my plan and then learn if they are competitive? There's a direct correlation between retirement plan return and the fees in investment portfolios. The equation is simple: for every dollar paid in fees, you get a dollar less return. So ask your broker or advisor for help and, once you have found the fees and learned how much they are, compare their competitiveness with industry averages for similar sized retirement plans.
3. How can my employees use the plan to their best advantage? One of the biggest fiduciary responsibilities you have as a retirement plan sponsor is to ensure participants (your employees) understand how to use the plan to achieve their retirement goals. To meet this responsibility, employees should have consistent access to the plan advisor. Retirement is one of the biggest issues facing America today. Retirement plans are designed to allow participants to actively participate in their retirement if they are properly educated. We have talked to numerous plan sponsors who tell us they and their employees haven't seen the plan advisor(s) for years. Because things are constantly changing, it's almost impossible for employees to understand how to use the plan unless there are regular meetings with an advisor.
Asking these questions can help you better manage your retirement plan for your employees, reduce your fiduciary liability and enjoy the best possible life after pharmacy.