Ever feel like you're on your own when it comes to planning for retirement?
Over the last few decades, much of the responsibility--and risk--of on-the-job retirement investing has shifted to employees. Fewer workers have traditional defined benefit pensions. And while many employees still have defined contribution plans, such as matching 401(k) plans, they handle their own saving and investment decisions.
Here's the problem: For most of us, do-it-yourself planning leads to needless mistakes and financial loss. That's because most of us aren't investment professionals, and we need expert help to reach our goals. This becomes painfully obvious in a rocky economy and stock market, like the one we're experiencing now.
And there's one other painful truth: Most people just don't want to be bothered. Only 19 percent of 401(k) plan participants make a trade of any kind in their accounts in a given year, according to research from employee benefits consulting firm Hewitt Associates. That suggests more than 80 percent of us just aren't paying attention.
As a result, far too many Americans aren't financially prepared for retirement. The average household approaches retirement with just $60,000 in retirement savings, according to The Center for Retirement Research at Boston College. That's just not going to cut it as American retirement security faces growing the growing threat of soaring health care expenses and falling real estate values.
A growing number of Americans seem to know they need help. A survey released this month by Metlife, the insurance and financial services company, shows growing employee interest in getting assistance with retirement and financial planning at work. Forty-nine percent of employees said they'd like some help, compared with 38 percent in a similar 2006 survey. Those expressing interest in overall financial planning rose to 44 percent from 30 percent.
Worries about economic security are driving this change. The percentages of employees telling pollsters they have "a high degree of worry" about intermediate and long-range financial issues increased sharply in areas such as health insurance, and having enough money to pay bills in the event of sudden income loss.
Another reason employees want more help is the growing complexity of benefits. "With multiple generations in the workforce, employers are learning that one-size-fits-all plans don't work," says Bill Mullaney, president of MetLife Institutional Business. "They're offering more options, but it adds complexity. People want help understanding what they need."
One other interesting finding is a gap between employees and bosses when it comes to the perceived value of benefits. More than 80 percent of employees cited quality benefits as a major factor in their loyalty to an employer, and the likelihood that they will stick around. Just 60 percent of employers viewed benefits as critical to employee retention.
Still, the survey did find that the number of employers providing on-the-job retirement education and assistance is growing. One common approach is to provide an online decision-making tool that helps employees understand what they need to be saving to meet their retirement needs. Most of the big corporate benefits consultants now offer these tools to their clients' employees, and a number of them are available at no charge to the general public.
A growing number of employers also are offering a "leave the driving to us" option in so-called "auto-pilot" retirement investing plans. These are mutual funds that invest with your designated retirement year in mind, and the investment mix shifts as the target date approaches.
Another option gaining in popularity is automatic rebalancing. Here, you invest in an array of funds but plan managers adjust the mix on a monthly or quarterly basis to keep your portfolios in sync with goals.
Hewitt Associates, the big employee benefits firm, forecasts that 60 percent of all employer-sponsored plans will offer automatic options by the end of this year.
Resources: I've posted a list of online retirement decision tools this week at http://retirementrevised.com.
(For millions of Baby Boomers, retirement is an opportunity for reinvention, rather than taking it easy. Mark Miller is helping write the playbook for the new career and personal pursuits of a generation. Mark blogs at www.retirementrevised.com; contact him with questions and comments at mark@retirementrevised.com)
