Consumer Confidence Rising Regarding Retirement Plans, But Not For All

It is important for professional retirement planners to understand this difference, VanDerhei said. There are many Americans that are not as badly prepared for retirement as a study’s bottom-line might suggest.

“I would say that the primary reason the numbers seen in the Retirement Confidence Survey are so low is because you’re including a large percentage of people who are not working for employers sponsoring a retirement plan,” VanDerhei said. That is why he always looks at the context behind the numbers in the survey.

“When you look at the database that we’ve had now since 1996 [maintained in conjunction with the Investment Company Institute , or ICI], the trend we see ever since the 2008 downturn is constantly increasing account balances, year-after-year-after-year. Again, split the population in half: those that are lucky enough to work for employers that sponsor these continue to do better-and-better-and-better since 2008. Those that don’t are doing very little to save on their own in IRAs,” VanDerhei said.

The other major trends that VanDerhei sees are the number of retirement plans being carried by employers declining, but the number of workers signing on for available plans increasing. There are three primary reasons: • An improved economy means more individual payroll can be invested for later • The value of plans accounts in the market has risen • More workers are getting the message about the need to save for retirement.

“You find that the number of plans decreased but the number of participants increased. It’s basically the smaller plans, it appears, that are in essence evaporating,” VanDerhei said. “To a large extent, what’s happening here is that these were plans that always had 401ks, but had been voluntary enrollment types. Now many employers are shifting to automatic enrollment types for the new employees.”

The result is that many lower-income employees who might never have signed on to a retirement plan in the past “are now going in on day one, and very few of them are opting out. Again, it’s not necessarily that more employers are getting involved, but those employers that are involved are restructuring their 401k plans to get higher participation rates,” VanDerhei said.

But despite the slightly good news about those with retirement plans, that still leaves the problem of the millions of workers that don’t. VanDerhei said there is a role for the U.S. government to play there.

“I can’t technically answer the ‘should’ part of that because we can’t take positions But as far as things they could do to improve the picture, I would say just about anything that would decrease the administrative burden on small employers would be a big help,” he said.

“Many small employers don’t have a separate person available to be in charge of employee benefits. If you have any administrative burden imposed by offering retirement benefits – whether it’s a simple IRA or what have you—in many cases an employer won’t think it’s worth the administrative difficulties of going ahead and setting this up. So anything that can make this easier in terms of the administration; in terms of having a safe harbor so there’s no fiduciary liability; whatever is going to make it simplified to the point where the employer’s not going to have to think twice once they throw the switch. That would be the biggest thing the government could do,” he said.