Younger people may be betterprepared for retirement because of regulations imposed in the wakeof the Pension Protection Act of 2006 and innovations likeauto-enrollment and auto-escalation.

Retirement readiness is within reach for participants in definedcontribution plans, according to a new John Hancock white paper,although the odds of their being prepared increase as agesdecrease.

The report, "State of the Participant 2020: readiness withinreach," finds that the older participants are, the lower thepercentage of those considered retirement ready—defined as havingsufficient projected assets by the time they hit the normal SocialSecurity age to replace at least 70 percent of their preretirementearnings.

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In fact, just 20.4 percent of those age 60 and older can beconsidered retirement ready, with other age groups' preparationlevel as follows: ages 50–59, 34.2 percent; ages 40–49, 53.3percent; ages 30–39, 65.9 percent (actually the best-prepared groupof the lot); and under age 30, 60.4 percent.

The percentage improves so markedly for those under 50,according to the report, because of regulations imposed in the wakeof the Pension Protection Act of 2006 and innovationslike auto-enrollment and auto-escalation.

But employers can do more to help employees prepare, says thereport, if they know where the shortcomings lie—and can act throughchanges in plan design, improvements in employee engagement andother techniques to make that happen. Among the strategies thereport suggests, in addition to automatic features, are choosingthe right qualified default investment alternative for autoenrollees; keeping abreast of fiduciary responsibilities to protectemployees; and riding herd on administrative inefficiencies to keepemployee costs down and contributions moving in a timelyfashion.

Higher default contribution rates at auto-enrollment, it pointsout, don't really affect opt-out rates for auto enrollment by asignificant margin, and incorporating an auto-escalation featurecan help employees better prepare, while self-directed investorscould benefit from nudges toward age-appropriate concentrations inequities. And target-date funds can take the thought out of theprocess for those who really aren't actively involved in managingtheir DC plan portfolio.

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