Five years after sweeping legislation altered the landscape for retirement savers, more workers are participating in 401(k)s and other workplace-savings plans. Success? Not so fast, critics say: Workers aren't necessarily better prepared for retirement than they were back in 2006.
SmartMoneyreports on the small provision in the Pension Protection Act of 2006 that allows companies to "auto-enroll" employees in a 401(k). The goal, according to the authors, was to use employee inertia in their favor, and according to some data, that's worked: 82% of employees in companies with auto-enrollment participate in their 401(k) plan, compared to just 56% of workers at firms without the program, according to data from Fidelity Investments. Almost 60% of large companies now use the feature – more than double the number that did before the legislation was passed.
And yet the magazine notes most investors are still woefully behind when it comes to retirement savings. In 2009, the average 401(k) was about $110,000, according to the most recent available data from the Employee Benefit Research Institute – down from $121,000 in 2006. Financial planners and advisors agree that that amount of savings would likely only generate income of $4,000 to $6,000 a year in retirement – not enough for most to continue their pre-retirement lifestyles. More than half of workers are in even worse financial shape, with less than $25,000 saved, according to a March EBRI survey.