Free Retirement Help You're Probably Ignoring

In late October, the Labor Department issued a rule that allows companies to offer more personalized retirement planning advice to workers enrolled in 401(k) plans. The advice must be set up in a way that ensures it's unbiased and in the worker's best interest.

That's the good news. The bad news is that most people probably won't take advantage of this terrific opportunity. The Wall Street Journal recently reported that just a quarter of workers who currently have access to such advice use it.

I found this astonishing, because retirement investing requires the average worker to morph into a financial wiz. You have to ballpark how long you expect to live, and get a sense of how much risk you're comfortable taking. You have to be familiar with terms like asset allocation, mutual fund, stock, bond, growth, value, small-cap, large-cap. And it helps enormously to understand how to minimize the costs of investing, which means learning to decipher an expense ratio.

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But most people don't even know what a money-market fund is, according to Shlomo Benartzi, a UCLA behavioral finance expert and creator of Save More Tomorrow, a program that helps workers increase their 401(k) contributions gradually over time. The most successful 401(k) plans, he says, automatically enroll people at a high percentage of salary, boost their contributions every year, and default the money into a target-date fund, which invests in a mix of stocks and bonds, and becomes more conservative as the participants near retirement and need the money. (I have issues with target-date funds, but they're a better option than defaulting worker contributions into a money market account.)

But the majority of plans aren't set up that way -- which is why taking advantage of good advice is so crucial. So if advice becomes a benefit at your job, set up an appointment. But first, ask yourself a few questions about what you value:

• What does your ideal retirement look like? Where do you live? How do you spend your time? Who do you spend it with? What aspects of retirement are you looking forward to the most? What experiences would you enjoy most? What activities will give you a sense of purpose and meaning? Write down your ideal day in retirement. Research has found when people are asked to come up with concrete images of retirement, they contribute more to their 401(k) plans.

• How much does my life cost right now on a monthly basis? What costs do I expect to disappear in retirement (i.e., work- and child-related costs) and show up (travel, dining out, etc.) The best first step to retirement planning is tracking exactly where your money goes now, so you have a ballpark idea of the monthly income you will need to sustain your lifestyle in retirement.

• How much do you expect to receive in Social Security benefits? You can estimate them here.

Now ask the planner:

• What's my number? How much do I need to save overall to maintain my lifestyle in retirement? What percentage of my salary do I need to set aside every paycheck in the 401(k) plan to achieve my desired monthly income in retirement?

• How can I figure out my comfort level with investment risk?

• What's the best, low-cost mix of diversified investments to achieve my goal? How often should I check back in with a planner to review their performance and make changes?

• What's the best way to balance my need to save for retirement with other goals, such as saving for college or paying off my mortgage?

• I'll spend my working years building this nest egg. What are the recommended strategies to spend it down? What do I need to think about in terms of taxes?

• Finally, ask the planner what happens if you can't save the recommended percentage of salary. What kinds of lifestyle adjustments and tradeoffs does he or she see people who are close to retirement making because they are short of their goals? Then ask yourself honestly if you're willing to do the same -- or make some changes to your spending now to improve your outcome down the road.

For more free advice, check out the Labor Department's guide Taking the Mystery Out of Retirement Planning.