Financial Advisor Magazine wrote an article with this disturbing headline. What leads them to come to this conclusion? Three reasons:
• Few companies offer their workers old fashioned pensions, known as “defined benefit” pension plans.
— the traditional pension that guarantees workers an annual income after they retire — has moved from the norm at Fortune 500 companies to all but extinct. In 1998, just more than half offered new hires a defined-benefit plan; by 2013, that had fallen to just 7 percent.
That trend continues: According to Towers Watson, at least three of the 34 Fortune 500 companies that offered defined-benefit plans to new hires last year won’t do so this year.
• Defined Contribution plans are taking their place.
…the 401(k)s and other such plans in which employers put money into an investment account in the worker’s name. In theory, employees can still save enough for retirement — if they put enough away, invest it wisely and engage in reasonable planning.
• And that’s the major problem with these plans. Workers don’t save enough or invest wisely or make good plans. That’s not because they are not smart, it’s because financial planning and investing is not their area of expertise.
A third of companies say their workers expect too much from defined-contribution plans, and 36 percent say those workers aren’t making informed decisions about their retirement. And it’s hard to expect any different, when most companies don’t think their workers even know what they’re trying to save, or use the available tools to do so.
What’s the answer? If you don’t have a pension and are relying on your 401(k) for retirement, you need help. That’s our area of expertise. Give us a call 757-638-5490 or got to our website and leave us a message. We’ll get back to you and let you know how we can help.