Posts Tagged ‘retirement’

401(k) Balances Nearly Double Since Recession

June 24th, 2014, Comments Off.

401(k) account balances have gone up 93 percent, nearly double since the economic downturn in 2009, according to the latest research from the Principal Financial Group. While much of the increase reflects a rebounding market, the study found a significant increase in participation and savings rates since the market collapse, with account balances rising 17 percent in 2013 alone, to an average of $54,000.

“The economic downturn may finally be in the rear view mirror, but the lessons learned from the crisis are hopefully influencing our savings habits as a nation moving forward,” said Jerry Patterson, senior vice president of Retirement and Investor Services for The Principal. “While we still have a lot of work to do to help Americans save at more adequate levels for retirement, these numbers are a positive sign that retirement savings are moving in the right direction.”
The study, conducted by The Principal Knowledge Center, analyzed retirement plan participants savings and deferral changes among those enrolled in an employer 401(k) plan from 2008 to 2013.

More savings, more engagement

The study found a significant increase in the number of employees acting to increase their contributions or deferrals into their employer’s plan. The number of participants choosing to increase their contribution rates has increased almost 70 percent since 2009. The average employee-contribution rate has increased by 14 percent during the same period.
“Employees are making great strides towards signing up to save more, but employees still succumb to inertia and often set and forget their savings,” noted Patterson. “That’s one of the reasons we’re working with employers to design plans that use the power of inertia to help individuals continue to save at more adequate levels.”
Patterson says changing plan design features to help make savings more automatic can capitalize on the upward trend and accelerate overall participation and savings rates. The company recommends several key automatic plan design features, including:

  • Automatic enrollment with at least 6 percent elective deferral.
  • Automatic escalation of at least 1 percent per year up to 10 percent.
  • Sweep all existing employees into the plan at least one time at the default deferral rate.
  • Stretch the match by using a formula that incents employees to defer at higher levels in order to get the full employer match.
  • Use an asset-allocation choice as the qualified default investment alternative.

For more information, visit www.principal.com.

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By Ayo Mseka
Editor-In-Chief

 

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Retirement Income Opportunity to Hit $22 Trillion by 2020

June 5th, 2013, Comments Off.

According to LIMRA research, investible retirement assets of U.S. households aged 55+ will nearly double to $22 trillion by 2020.

“There is a huge opportunity for the financial services industry to help Americans identify how much income they will need in retirement, develop a plan for investing their portfolio to generate income, while continuing to grow their assets,” says Jafor Iqbal, associate managing director, LIMRA Retirement Research.

In 2010, U.S. households age 55+ held $12 trillion, according to LIMRA analysis of the Survey of Consumers Finances, Federal Reserve Board. Based on U.S. Census projections, the assets held by this cohort will grow to $22 trillion that they will directly invest in products for generating retirement income.

The number of Americans who receive income from an employment-based pension plan is declining, and there will be many more retirees who will have most of their retirement assets invested in retirement plans. The study estimates that almost two-thirds of these assets will be directed towards products that will generate income for them in retirement.

“With such a large demand, advisors may have to provide income product solutions more efficiently,” notes Iqbal. “We are witnessing financial services firms changing the structure and business model to accommodate more customer-centric information and process, promoting uniform tools and services across the institutional and retail businesses to capture rollovers, emphasizing smooth transition of assets from the savings in institutional plans to retail side of the business where most retirement income products and solution are typically available.”

These findings are included in LIMRA’s new Retirement Income Reference Book, which was published in December 2012. The RIRB provides a comprehensive view of the latest LIMRA data, projections and research on retirement income market, and brings together highlights from the various studies that LIMRA has been doing to help companies achieve their strategic business goals in the retirement space.

For more information, visit LIMRA at www.limra.com.

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By Ayo Mseka
Editor-In-Chief
Advisor Today

 

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