Why is the 401(k) industry getting such a bad rap?
By Paula Aven Gladych
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.
But is the 401(k) industry so bad? Why is it always cast as an outlaw in the retirement readiness showdown?
Todd Berghuis, senior vice president of ERISA compliance for Ascensus, said in a recent blog post that while no industry is perfect, including the 401(k) market, people shouldn’t shoot the messenger when it comes to news about retirement readiness. Having access to a retirement vehicle is more important than finding a nonexistent perfect retirement vehicle, he said.
Numerous studies in the past year have highlighted that although 80 percent of full-time American workers have access to a workplace retirement plan, only about 60 percent take advantage of that. And those that do take advantage don’t defer enough of their salary to meet their income needs in retirement.
Greg Ward, director of the Financial Finesse think tank and a senior resident financial planner with the company, said that much of the criticism of the 401(k) industry does stem from the fact that employees are not doing enough to prepare for retirement and most don’t even know how much money they need to save.
Originally published on BenefitsPro.com