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6/25/2013 0 Comments

Improving Retiree Outcomes Helps Employers

Mercer recently released a report that outlines why the firm thinks that it is a good business practice for employers to implement programs that will help employees to achieve a secure retirement. According to Securing Retirement Outcomes for the Employee: Why the Employer Should Intervene, the primary reasons the employer should take on this task are:

The employer has the buying power and leverage to reduce costs that individuals otherwise would be unable to accomplish on their own.

Helping employees to help themselves falls within the parameters of corporate social responsibility. This improves both the employment and social brand.
Financial pressures are keeping employees in the workforce longer. Helping employees achieve retirement security will increase management flexibility for the employer and reduce severance costs.
Employee engagement and loyalty improves along with the employer's efforts to help ensure a secure retirement. A good retirement program is the second most valued reward for employees after base salary.
The greater the plan assets, the lower the asset management costs.
Target-date funds that are properly designed to meet the needs of the workforce will be better aligned with those needs. Thus there also is better alignment with infrastructure investments that have already been made.
A framework can be put into place to address the employer's fiduciary concerns.

Mercer has identified a "trilemma", noting that retirees cannot have their cake and eat it, too. According to Mercer, there are tensions among the competing objectives of access to capital, protection from risk, and participation in upside. Mercer suggests a variety of solutions to the trilemma.

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6/18/2013 0 Comments

Study Looks at 401(k) Plan Costs

Sign of the season

The Investment Company Institute (ICI) looks at the various fees, expenses, and services associated with implementing and maintaining a 401(k) plan. The ICI report notes the following:

401(k) participants hold mutual funds at an expense ratio less than half of the general investing population (1.40% vs. 0.63%).
The expense ratio for 401(k) assets in mutual funds has dropped from 0.74% to 0.63% since 1998.
Employers with 401(k) plans typically hire service providers, which has a cost.
Employers and employees usually share the cost of operating the plan.
401(k) plans are complex to operate due to numerous laws and regulations.
401(k) assets have grown from $385 billion in 1990 to over $3.6 billion today,more than half of which is invested in mutual funds.
Typical 401(k) plan services may be administrative, participant- focused, or regulatory/compliance in nature.
Service providers may be compensated via a variety of arrangements.

The full report ("The Economics of Providing 401(k) plans: Services, Fees, and Expenses: 2012") provides additional detail on these plan costs, as well as current and historical data on mutual funds in 401(k) plans.

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6/12/2013 0 Comments

Health & Finances Top of Mind as We Age

Can you find planes, trains, automobiles, trucks, ship containers?

According to the Get Old survey conducted by Harris on behalf of pharmaceutical giant Pfizer, Inc., concerns about both health and finances cut across generations. Health worries start to kick in around age 40, as Americans prioritize their physical health over wisdom and wealth. Three out of five (61%) Millenial and Baby Boomer workers are worried about being able to find a new job if they lost their current one. Generation X and the Greatest Generation (age 68+) are more concerned about being able to retire when they want to (57%). Nearly four in five (78%) believe that those who work past retirement age stay healthier longer and are happier, but 50% are also concerned about the availability of job opportunities in their city. Understanding what is on the minds of people as they prepare for and move into retirement is important in terms of helping them navigate this stage of their lives. Additional survey findings and info graphics are available on the Pfizer website.

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6/6/2013 1 Comment

401(k) Balances Up, But Worries Persist

401(k) account balances continue to bounce back, reaching new record highs, according to the latest quarterly statistics from Fidelity. At the height of the economic downturn in early 2009, the average account among Fidelity clients stood at $46,200. At the end of the first quarter of 2013, this figure had jumped to $80,900, representing an 8.4% increase over the same period last year. Fidelity attributes the growth to continued contributions by employees and employers, as well as strong equity markets. The average balance for those age 55 and older reached $255,000 at the end of this year's first quarter, almost double the figure from four years ago.

This optimism is tempered, however, by the worries of a large part of the population. According to a Prudential study, Turning Employees Into Lifetime Savers, "It's not that Americans don't view retirement as a priority. . . . Across age cohorts, American workers face a gap between what their belief in the importance to save for retirement is and their ability to do so." The Prudential report suggests that the solution to saving more for retirement should "take into account their individual financial lives and needs."

It appears that for those who have been able to save for retirement, things are looking better, but there remains a need to address the underlying inability for many others to achieve this goal as well. There are many who want to save more for retirement, but for whom the financial obstacles simply feel overwhelming.

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Improving Retiree Outcomes Helps Employers

Study Looks at 401(k) Plan Costs

Health & Finances Top of Mind as We Age

401(k) Balances Up, But Worries Persist

Blog Author - Ken Felsher

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