News from the retirement front hasn’t been cheery for some time.
Study after study has depicted would-be retirees as financially ill-prepared to enjoy their golden years in leisure.
The market crash, the burst housing bubble, a lack of savings coupled with an inability to save for retirement, and the disappearance of defined benefit plans, largely replaced by defined contribution plans, have all been cited as factors in the “retirement crisis.”
Lately the retirement industry has been battling criticism on a new front — costs — since a “Frontline” documentary hit the airwaves in April.
According to the documentary, retirement is a “gamble”: high fees on many mutual funds within 401(k) plans cut yields, costing plan participants a substantial portion of potential retirement funds — a portion large enough to make the difference between comfortable retirement and the need to keep working.
The industry has not taken the slams lying down.
Several organizations have responded, challenging the documentary’s assertions. Among the reams of information that the industry is promoting is new research indicating Americans are better off for retirement than previously thought, according to mutual fund industry trade group the Investment Company Institute.
Its study concluded that, “on average, more-recent generations of households have higher levels of resources to draw on in retirement than previous generations.”
That runs counter to the statistics cited by the “Frontline” documentary that a third of Americans have “next to no retirement savings at all” and that half of Americans say they can’t afford to save for retirement.
But according to Brian Reid, chief economist at ICI, “By the time people approach retirement, 80 percent of people have some form of employer-based retirement savings.”
ICI’s website says those data are from the Survey of Consumer Finances, conducted by the Federal Reserve Board, indicating that about 80 percent of near-retiree households hold retirement resources in defined benefit or defined contribution plans or IRAs.
Reid also said 401(k) plans make up an important part of retirement assets, along with Social Security and home ownership — the two primary retirement resources for Americans.
He added that, while the documentary “seems to have suggested that retirement security has been declining over time,” in actuality “it’s the opposite,” with the passage of ERISA in 1974 weeding out “a lot of the bad plans” and the portability of the 401(k) plan “so much better a design for a more mobile workforce, since it can really benefit workers as long as they participate.”