The 20 Rising Stars of Retirement Plan Advisors 2007 - (Page 11) sponsored article What is needed is a fundamentally different approach. Retirement income security can only be achieved through an approach that targets distinct types of investors. Each type requires different tactical solutions. Retirement plan providers and plan sponsors should consider the needs of each group separately in the context of a unified, yet flexible, savings and investment program. And, when considering the needs of the group as a whole, it is imperative to recognize that all participants need continuous feedback on their progress toward meeting their retirement goals. TAKING STOCK: SO, HOW ARE WE DOING? Given the enormous growth of the defined contribution plan industry, has it really been successful? Employers have doubts. Aon Consulting’s 2006 National Employee Benefits Trend Survey found that 39% of employers believe that only half of their employees will have enough income to retire at a reasonable age (ages 62 to 65.) Increasingly, employers are looking to their plan providers for a better solution. According to a 2006 study by Brightwork Partners, LLC, the most cited reason for plan sponsors switching providers was: “we wanted better investment advice for our participants.” The 4th most highly cited reason was “we wanted better participant education materials.” And ranking 5th was “we wanted a provider that could help us achieve higher participation and deferral rates.” PARTICIPANTS PROVIDE THE ULTIMATE ANSWER The best way to gauge the success of the defined contribution plan is to look at the ultimate end-user: the retirement plan participant. There is no shortage of industry data that speaks to the failure of retirement planning in America so far: 2 3 4 “Retirement income security can only be achieved through an approach that targets distinct types of investors.” • Nearly one in four Americans, or 23%, has not yet begun to save for retirement.2 • 75% of workers have less than $10,000 saved for retirement.3 • More than half of workers age 55 or older, have less than $50,000 saved for retirement.4 • 73% of plan participants say they aren’t overly confident in their investing abilities.5 • One in five Americans think the most practical way to accumulate wealth is by winning the lottery, not saving or investing.6 • Almost half of consumers say retirement planning is harder than raising a child.7 • Nearly three out of five Americans ages 35-49 are saving less than $10,000 a year. Nearly a third of Americans saved nothing for retirement in 2005.8 • 22% of baby boomers say they’ll rely on the sale of their home for income in retirement.9 • Almost half of Americans—46%—expect to fund their retirement through Social Security and pensions, and an equal number expect that their retirement funds will last them 10-20 years.10 BACK TO THE FUTURE Despite the established history, popularity and growth of employer-sponsored defined contribution plans, it is all too clear that the industry still does not have the right combination of solutions in place for plan participants or employers. To better understand what the industry needs to do now, we must first look to the past. The first approach, in the early eighties, was a basic package of enrollment materials—ranging from retirement planning and investment planning workbooks, slide savings calculators, enrollment videos and other ancillary tools. 2006 Harris Interactive Poll for the American Institute of Certified Public Accountants, as reported on www.retirementsmarts.org. Employee Benefit Research Institute’s 2006 Retirement Confidence Study, in partnership with Matthew Greenwald and Associates. Ibid. 5 The Scarborough Group 2006 survey, as cited by Rebecca Moore in her article “Participants Not Confident in Investing Abilities;” PlanSponsor, Nov. 28, 2006. 6 2005 Consumer Federation of America, as reported on www.retirementsmarts.org. 7 2006 ING survey, as reported on www.retirementsmarts.org. 8 2006 Financial Services Forum Survey, as reported on www.retirementsmarts.org. 9 2006 Fidelity Survey, as reported on www.retirementsmarts.org. 10 2006 Harris Interactive Poll for the American Institute of Certified Public Accountants, as reported on www.retirementsmarts.org. SEPTEMBER 2007 RETIREMENT PLAN ADVISORS RISING STARS 11 http://www.retirementsmarts.org http://www.retirementsmarts.org http://www.retirementsmarts.org http://www.retirementsmarts.org http://www.retirementsmarts.org http://www.retirementsmarts.org
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