Jason Zweig addresses the serious issue of retirement in modern America. Gone is the day of working for a company for 40 years and retiring with a pension. The path to a comfortable retirement now requires a positive action on the part of workers, including participation on 401(k) plans at their workplace. But getting that participation is a challenge.
This month, the Employee Benefit Research Institute reported that 68% of workers in its annual Retirement Confidence Survey said they think they need to save at least 10% of their household income to live comfortably in retirement. Yet only 24% report that they have saved at least $100,000, and just 57% say they are saving for retirement.
That’s the answer? Automatic enrollment.
One way to exploit that inertia for a better outcome is automatic enrollment, in which employers default all new workers into the retirement plan unless the workers refuse to participate, which they are free to do at any time.
We agree. But there is another factor which enters into the process: making the actual decisions regarding the amount to invest and the investment choices in the plan. Zweig suggests that employers build plans that include automatic escalation features. That can be part of the solution, but not the whole solution. In the meantime investment professionals can help. Getting expert advice can make the difference between a comfortable retirement and one in which the retiree can’t taken advantage of the free time that retirement provides. For more information, contact us.