By Paula Aven Gladych
Three in five 401(k) plan participants wish their employers would be a bit more proactive in educating them about their retirement plan options.
According to the “Fourth Annual 2012 DC Participant Experience Study” by KK & Company and Greenwald & Associates, 401(k) participants would appreciate if their companies provided them with more analysis, solutions and a better understanding of the tools and guidance the plan provider has to help them optimize the use of their retirement plan
Almost half of participants felt like they were behind in saving for retirement.
"The American worker is aware and concerned about their retirement. They are looking for more insights on how to prepare and manage for retirement, rather than understanding the rules and mechanics of their 401(k) plan," said Mathew Greenwald.
Most participants said they were extremely or very interested in receiving a statement from their plan with projections of how much they would need to have in their retirement plan at retirement age if they continued contributing at their current rate.
The study found that many people have a false sense of their own retirement readiness. Of the 54 percent of respondents who said their retirement savings is on track or ahead of schedule, half were over age 35 and had less than $250,000 saved in their defined contribution account. Twenty-six percent had less than $100,000 saved.
The study’s authors recommend that employers include a calculation for all retirement plan participants
so they have a goal to monitor progress; implement a simple report that automatically calculates their potential retirement savings based on current age, normal retirement age, salary and current retirement savings plan; give participants the option to include other retirement savings as part of the calculation; and create an online tool that educates them on how to time retirement and how the amount of retirement deferral and investment performance impacts their retirement savings outcomes.
Additionally, a projection of how much they are on track to accumulate this goal by retirement age will clearly help participants make better-informed decisions. Three approaches to projections were tested in the survey and the one that is most preferred is a projection based on a continuation of contribution rates.
"Less than half of participants have tried to calculate the required amount to replace their salary for retirement. The question this raises is obvious: Without having a goal, how can they manage their progress and expectations?" said Kendall Kay of KK & Company. "Every participant should be provided this calculation automatically if they are in a 401k plan
Information for this study was gathered through 17-minute interviews with a total of 1,018 plan participants, using the Research Now online Panel. Interviewing took place from Aug. 15-22, 2012.
Mathew Greenwald & Associates, Inc. is full service market research Company that specializes in serving the needs of the financial services industry. KK & Company provides strategic planning, marketing, and business development for financial services and health care organizations.
Originally published on BenefitsPro.com