In an effort to close the knowledge gap of 401(k) plan participants, the Department of Labor has launched a new website filled with information on investment fees. The site is comprised of links to videos, webinars, and printed material. Whether the additional information will assist participants or add yet another layer of confusion remains to be seen. Behavioral research has generally shown that participants might be offered a multitude of investment choices, but in the end they will take the path of least resistance, holding perhaps a handful of investment options. Participants like simplicity in making investment choices. You can find Understanding Your Retirement Plan Fees on the the DOL's website at http://www.dol.gov/ebsa/publications/understandingretirementfees.html
According to a new report from the Insured Retirement Institute (IRI), individuals belonging to the Baby Boomer and Generation X populations are outwardly optimistic, but several factors temper this enthusiasm. For both generations measured in the study, three out of every four individuals were somewhat to very confident of their ability to retire comfortably. By contrast, only about half the Boomers had calculated how much they would need for retirement, and only about four in ten Gen X'ers performed such a calculation. Significant segments of both generations had less than $50,000 saved for retirement, and another large group had no retirement savings at all. Those who calculated their retirement needs and those who worked with an advisor tended to have higher levels of confidence. Notably, the annual Retirement Confidence Survey released earlier this year reported confidence remained stagnant at historically low levels. (See http://www.ebri.org/pdf/surveys/rcs/2012/PR962_13Mar12_RCS.pdf) The full IRI report, Baby Boomers and Generation Xers: Are They on Track to Reach Their Retirement Goals, is available online at IRI's website: https://www.myirionline.org/eweb/uploads/Boomers%20and%20Gen-X%20Final.pdf.
According to a new report from Boston College's Center for Retirement Research (CRR), improvements are needed in terms of covering more private sector employees with retirement plans. According to the CRR, while virtually all state and local workers are covered by a retirement plan, only 42% of private sector employees between ages 25 and 64 have any coverage in their current jobs. The challenge, according to the CRR, is that one-third of households lack any sort of coverage during their careers, and another large segment that moves in and out of coverage hold inadequate 401(k) balances. Regardless of how one defines coverage and participation, pension coverage was lower in 2010 than it was three decades before. The CRR is concerned that a substantial group of households will rely totally on Social Security in retirement. The problem appears to be more acute for smaller firms. The CRR recommends a new, comprehensive tier of retirement income. The full CRR brief is available on its website at http://crr.bc.edu/wp-content/uploads/2012/09/IB_12-16.pdf.
According to EBRI's August 2012 Notes, the oft-recommended suggestion that individuals work until age 70 may not be as ideal a solution as it might seem. EBRI points out that many calculations forget to factor in such elements as nursing home stays and tend to paint a static image of retirement savings rather than something more dynamic. EBRI states that participating in a DC plan after age 65 will become increasingly important as there will be additional employee and employer contributions over a period of time.
The EBRI Notes document is available at http://www.ebri.org/publications/notes/index.cfm?fa=notesDisp&content_id=5102.
Blog Author - Ken Felsher
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