Employee Retirement Accounts 101
Like Kuby & Huell in Breaking Bad, you’ve probably wondered what it’s like to lay in a massive pile of money.
Unlike them, or Walter White, you don’t have to start a meth empire to enjoy a comfortable retirment.
When it comes to employee benefits, you often think about:
- Salary & Compensation package
- International school fees
- Group health insurance
- Group life insurance
- Housing allowance
But what about retirement benefits? Have you ever seen it advertised in a job post? Do you know anyone who gets a retirement benefit as part of their package?
I’m not talking about state sponsored systems, I’m talking about a company sponsored program. In a recent poll I ran, 93% of respondents replied that they didn’t get any retirement benefits provided by their employer.
About Employee Retirement Plans
Employee retirement accounts are provided by international savings & investment providers, where the plan could either be:
- Company sponsored
- Take by the employees themselves, privately, without your company’s involvement
A fixed monthly contribution is put into the account for a fixed period of time, like 5, 10, 15, 20 years.
The contributions are invested into various funds, like: S&P 500 tracker, New Technology, Global equities, eCommerce, North American, Emerging Markets & more.
Each fund is run by a professional fund managers who are in regulated & safe international jurisdictions & make the decisions about the fund’s composite and investment decisions.
Over time, savings accrue and can be used for retirement, among other things.
Key Features of Employee Retirement Plans
- Contributions start as low as $100 USD/month
- Term start from 5+ years
- Could introduce a vesting period, minimum period of time before it becomes available to your employee at all
- Could introduce employer matching system, where an employee agrees to put $X into their account and the employer agrees to match $X up to a certain amount
- Can be owned by your company or your employee, depending on how involved your company wants to be
- Money is held by major custodian banks like Citi, BNY Mellon, etc.
- Save money in an international enviornment in USD, Euro, GBP
- Available in most countries and to most nationalities, expats or locals
Why Would you Implement Them
Many reasons to, but to name a few:
- Enhance Employee Financial Security
- Make your company a destination company
- Stand out from your competitors
- Reduce employee turnover, hiring costs
Use Case
Let’s look at an example with three levels of employees:
Assumptions for the value at the end of the term:
- Contribution % doesn’t change
- Salary doesn’t change
- No contributions are missed
- No lump sums are added
- Return at 6% and 8% respectively, net of all fees (vary by term length)
Imagine your company 5 year from now if you implemented something like this.
