With an economy that’s still drooping in spots and high long-term unemployment now a part of the landscape, it isn’t surprising that politicians have taken notice of the retirement crisis in America.
American workers’ lack of retirement readiness has been dropped on the doorstep of the defined contribution market and it’s been pointed out again and again that 401(k) plans just don’t offer the same benefits and guarantees that used to come with defined benefit pension plans.
Much of the emphasis in retirement education has been on saving for retirement, but the amount needed in retirement is a vague notion nobody cares to explore. Obviously, if a person is setting money aside for retirement, that amount will be enough. But “in reality, they should be saving more,” Ward said.
“Part of it is acknowledging that we have been telling them to save but not giving them the tools, resources or education they need to know how much they should be saving with respect to investments,” he added.
“Fee disclosures are now required every year, which is an improvement,” said Ward. “As the marketplace becomes more aware of the expenses associated with these programs, that may be another reason the 401(k) industry is coming under more scrutiny.”
Chad Parks, founder and CEO of The Online 401(k), plants the 401(k) industry’s bad reputation at its doorstep saying that “historically it has been less than transparent in its pricing model.”
Even with its myriad problems, the 401(k) industry is still very important and “if it hadn’t been for the advent of this industry and providers being willing to do this work, a lot of people would be a lot worse off today. It is not perfect or the leanest approach it could have been, but people are still coming out ahead because they wouldn’t have a vehicle otherwise,” Parks said. The industry “needs to continue to evolve and evolve faster.”
The industry can be blamed for some of the retirement crisis but at some point individuals have to take charge of their own behavior, including being aware of their investments and the fees being charged through their retirement plans, Ward said.