Does your company offer a 401(k) plan? Are you a plan participant or are you a plan sponsor? If you are a plan participant, how confident are you that you are saving enough for your desired retirement and investing it appropriately? You may be surprised to hear that your plan sponsor probably over- estimates your confidence in your retirement planning and may not realize that many plan participants would like more education regarding the plan and how it can be maximized in their retirement planning. This is an issue that we see with some of the 401(k) plans that we work with and it can lead to a reduced participation rate for plans that ultimately hurts employees' long term financial security.
Many plan sponsors that we speak to cite recruiting and retaining a talented workforce as the primary reason for having a 401(k) plan. My challenge to plan sponsors is to look a little deeper and find out why a 401(k) plan is such a critical benefit for employees to have. With traditional pension plans (Defined Benefit) becoming less and less prevalent, employees are now required to save more for their own retirement than in years past. This has put pressure on individuals to take more responsibility for planning for their own retirement. Many plan participants we speak to are unsure of how much they need to be saving or how to invest it.
The 2016 Blackrock DC Pulse Survey of plan sponsors and participants reveals that these observations are more common than plan sponsors might be aware of. The survey results were based on the input of 200 plan sponsors and 1,003 plan participants with over $300,000,000.00 in retirement plan assets. Blackrock's DC survey found that while 59% of plan sponsors believe that the majority of their participants are saving enough, only 28% of participants believe they are saving enough. In addition, the survey found that 67% of plan sponsors claim that their participants understand their investment options and other retirement savings information while only 43% of participants say they actually do.
Plan sponsors should take heed of the disparity between their perception of their plan's effectiveness and what their participants are actually experiencing. Plan sponsors should ensure that their plan's participant education program is stronger than just offering a few online calculators and articles. Not all participants are do-it-yourself investors and some will require additional assistance. I highly recommend that plan sponsors consider engaging the services of an advisor who is willing to become a co-fiduciary of their plan and provide tailored retirement advice to their plan participants.