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Workers Aren't Making the Most of Their 401(k)s

A recent study from Towers Watson indicates that many employees have not adequately prepared for retirement. The survey of defined contribution (DC) plan sponsors found that many are concerned that their employees are not ready for retirement. However, when they structure these DC plans, workers' ability to retire is low on the list design factors, even though 74 percent of employers said they try to keep adequate retirement income a priority.

In addition, only 22 percent of respondents felt that their employees make informed decisions about their DC plans, while just 9 percent think their workers have "established retirement income goals." A relatively small group - 26 percent - said they think employees have "realistic expectations about what DC plans can provide."

It's not only the employers who are skeptical, however. Towers Watson pointed to an earlier study, its 2011 Retirement Attitudes Survey, which determined that just 63 percent of responding workers that only have a DC plan felt somewhat or very confident that their retirement resources could sustain them for 15 years of retirement. That figure dropped even further, to 42 percent, when respondents were asked if their plans would last for 25 years of retirement. Supplying advice about career management and retirement planning could help make employees more secure. 


Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

The research has never changed. The % of disposable income in an individual's life at different periods is more or less consistent. The game changer occurred in the 2008 market meltdown, when 401k's stopped steady growth, declined greatly in 2008 and have stalled ever since. If you did change jobs, as many did, most companies require a year of employment prior to you joining their 401k program. As Barrett eluded to, the power of a 401k is in consistent contributions yielding compounded growth. For the afforementioned reasons, that is not possible. But I still contribute...

Topic Expert
Barrett Peterson
Title: Senior Manager, Actg Stnds & Analysis
Company: TTX
(Senior Manager, Actg Stnds & Analysis, TTX) |

The "guideline" of 10 times (final) pay is unachievable in a 401-K in today's economic environment for nearly all parties. Many will not be part of a plan for all of their working lives.