Some of the retirement industry’s biggest players are gathering this week to lay the groundwork for a national public-service campaign aimed at turning more Americans into “super savers” who stash away at least 10 percent of their pay.
“We must change savings behavior, because otherwise, the outcome is unacceptable,” Stig Nybo, president of U.S. retirement strategy for Transamerica Retirement Solutions, said in revealing the plan.
“What is coming down the pike right now is ugly,” he said. Getting people to save more will be a tall order.
Average defined contribution (DC) plan account balances are now at an all-time high of more than $95,000. That’s an increase from $85,600 in 2012. The number of employees participating in DC plans also has increased, rising to 77 percent in 2013 vs. 71 percent in 2012. But those numbers, while trending in the right direction, are skewed by wealthier DC plan participants.
Thirty-six percent of the working population has yet to put a dime away for when they’ll leave the workplace, according to a survey earlier this year by Bankrate.com.
Worse yet, many Americans are accumulating debt faster than they’re putting money into their 401(k)s, according to a 2013 HelloWallet study.
From 1992-2010, one-third of working households enrolled in a 401(k) plan took on $2.7 trillion in debt, HelloWallet said. Sixty percent of those households took on more debt than they saved, the data showed.
Speaking Tuesday at the 67th annual Plan Sponsor Council of America meeting in Aventura, Florida, Nybo told the audience of employers, retirement advisors, third-party administrators and others that it was their responsibility to help address a growing crisis.
“We are not accomplishing what we need to accomplish,” he said. “We have to figure it out, as a group, as a collective, as a society. … We have to change.” The problem isn’t only inadequate savings or that people are living longer but that Americans simply spend too much, he said.
“Consumerism is the killer,” he said, noting that many households spend $3,000 or more a year on their cable and cellphone bills alone. “That’s $3,000 on things you never knew existed as a child,” he said. It’s no wonder, he said, that 61 percent of Americans are now more afraid of outliving their assets than dying.
To help create a nation of “super savers,” he said, Transamerica is joining more than a dozen industry leaders to develop a public-awareness campaign.
Their aim will be to produce a series of ads on the level of the “Rosie the Riveter” ad campaign of the 1940s, which encouraged women to join the workforce during World War II, or the Keep America Beautiful campaign of the 1970s featuring actor Iron Eyes Cody.
Both campaigns helped change behavior in dramatic ways, the first bringing women out of their homes and onto factory floors in huge numbers and the other helping to dramatically reduce littering.
Ad campaigns aside, plan sponsors, Nybo said, also can do more to address the problem.
“No one else will take the stand that you can. We can change beliefs on the ground level,” he said.
Doing that, he said, will require more employers to adopt auto-enrollment features in their DC plans. Less than 50 percent of large plans now have incorporated auto-enrollment in their plan designs.
“We need to harness workers’ inertia,” Nybo said.
Auto-escalation, seen in about 25 percent of plans, also should be more widely embraced, he said, noting that too few smaller employers so far have done so.
Moreover, a 3 percent deferral rate and 1 percent annual escalations aren’t enough, he said. What might be enough, he said, is a national savings rate of 10 percent.
“That would have a material effect on us as nation,” he said.
Nybo’s presentation included a clip from the “Dead Poets Society,” the 1989 Robin Williams drama in which some of the students in Williams’ class stand on their desks in protest of his dismissal.
That small “social movement,” Nybo said, is how a national retirement savings campaign can start, “with someone standing up for something and not sitting back down.”
“The hardest part of any social movement is getting the followers, people who have the guts to take the risk. Then, eventually, you get to a tipping point and the risk in staying seated is greater than standing.”