Retirement Savings Lag


Companies are concerned that employees aren't saving enough for retirement, according to the annual 401(k) benchmarking survey sponsored by Deloitte Consulting, the International Foundation of Employee Benefit Plans and the International Society of Certified Employee Benefit Specialists. Just 15% of the 455 companies surveyed expect most of their employees to be financially prepared for retirement, while 67% say some employees will be ready and 18% say very few will be ready.

Meanwhile, companies seem wary of newer products that might alleviate the problem, like managed accounts and retirement income products.

"Providers are offering different ways in which plan sponsors can help their participants be ready and plan sponsors, I think, are slow on the uptake in using these tools," says Stacy Sandler, a principal at Deloitte Consulting.

Most notably, just 1% of the companies say they've added an in-plan retirement income feature, and only 4% have a post-retirement annuity purchase option. Three-quarters of the companies say they're not considering adding either an in-plan or post-retirement income product.

Managed accounts, in which plan participants delegate their investment decisions, are a little more popular. Twenty-five percent of the companies offer managed accounts, while another 10% say they're considering doing so.

Providing employees with individual investment or financial advice is more widespread. Fifty-one percent of companies currently offer such advice and another 16% say they may add it to their plans in the next two years. "When you look at the use, the plan sponsors seem to be leaning toward more of individual financial counseling rather than some of these automated tools," Sandler says.

Approaches and products with a longer track record are more widely used. For example, 65% of companies offer a qualified default investment alternative, and the majority use target-date or lifecycle funds. Forty-nine percent use automatic enrollment, though that's down a bit from 52% in 2009.

Survey results also point to some disturbing trends. Forty-nine percent of companies say they've seen participants borrowing more from their 401(k) accounts in the past 12 months, 41% say participants have decreased their deferral rates, 40% say they're seeing more hardship withdrawals from plans, and 21% say employees are rebalancing their 401(k) portfolios to be less aggressive.


To read about how best to structure a company match, see Redesigning 401(k) Match Can Spur Workers to Save.

The 401(k) benchmarking survey is available at http://www.deloitte.com/us/401k2010

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