Employees are beginning to realize they cannot rely on public pension plans for retirement security. The 401(k) plan must become more of a pension fund like plan. The less decisions the employee has to make the greater the success. Remember your portfolio si like a bar of soap the more you touch it the smaller it gets.
“Employers understand that financial wellness is more than what workers are doing today in terms of savings in their retirement programs—that it’s evaluating whether their long-term investment strategies are positioning them to be ready when it comes time to retire, and whether other priorities are getting in the way,” said Patti Balthazor Björk, director of Retirement Research at Aon Hewitt. “Helping workers get an accurate picture of their future needs and whether they are on track to meet those needs, and helping them create a roadmap for achieving those goals is paramount.”To help workers reach their retirement goals, employers continue to offer and promote the use of investment advisory tools. More than three-quarters (76 percent) currently offer target-date funds as a way to provide workers with a simple and straightforward approach to investing. Of those who do not offer target-date funds, 35 percent will likely add this option in 2013. Managed accounts and online third-party investment advisory services also continue to gain popularity (64 percent), up from just 40 percent in 2012.
“To ensure that a worker’s investment risk exposure appropriately matches their needs given their age and other factors, it is critical that 401k investors periodically rebalance their portfolios. However, we know that most rarely, if ever, do so because they are overwhelmed or unsure about their investment choices,” explained Björk. “Features like target-date funds and managed accounts take some of the guess work out of investing, which can help workers stay on track with their savings goals.”
Employers are beginning to realize that their employees need help in reaching their long term financial goals. The 401(k) plan has become the sole source of retirement for most Americans. The need for a more pension fund like plan has never been greater than now.
Please comment or call to discuss how this affects you and your employees.