Benefits & Compensation News

Weekly roundup: 401k disclosures not going over well, 8x pay needed to retire

The new 401k disclosures don’t appear to be a big hit. Plus, there are new figures on how much cash workers need to retire to go along with other retirement plan news from the past week.

401k fee disclosures baffle small firms

As you know, retirement plan providers had to issue participants statements disclosing what they charge for their services.

The problem: They’re leading to more questions and concerns than answers. Specifically, the disclosures are not helping plan sponsors determine if the plans they’re enrolled in are good or bad, according to a recent survey of 500 small businesses by ShareBuilder 401k, a retirement plan provider.

The findings:

  • 83% of small business owners (those employing fewer than 100) have questions about what the disclosures mean
  • 63% were not prepared to answer employees’ questions about the fees, and
  • 45% of the business owners surveyed thought 4% was a reasonable fee to pay (the average fee paid by plans with less than $1 million in assets is less than 2%).

Research reveals new retirement savings schedule

Fidelity Investments has just released new savings goals workers should strive to hit if they wish to meet their basic needs in retirement.

It says workers should have:

  • the equivalent of their annual salary in savings by age 35
  • twice their salary in savings by age 40
  • four times their salary by age 50
  • five times their salary by age 55
  • six times their salary by age 60, and
  • the equivalent of eight times their annual salary by age 67, the projected typical retirement age.

Fidelity says these goals can be reached if a worker starts contributing 6% of his/her pay at age 25 and increases the contribution 1% every year until the person hits 12% of pay, all while receiving a 3% match from an employer.

The person’s portfolio would also have to grow at a rate of 5.5% per year.

Many happy with their retirement savings

Speaking of retirement savings goals, some good news recently came out of a survey of more than 1,000 adults age 35 to 70 by The PNC Financial Services Group.

In the survey:

  • almost 75% said they contribute as much as they possibly can to their employer-based retirement account
  • close to seven in 10 said they regularly save outside of their employer account
  • nearly 66% with $100,000 or more in their retirement account said they’re on target to hit their retirement savings goals, and
  • when asked what their most important retirement-related decision has been in their lives, 47% said “living within my means,” 40% said making saving for retirement their main goal and 35% said starting to save at a young age.
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