How do we fix America’s savings crisis?
First, we need to understand the problem. The average savings rate in America is around 5%, and the average 401(k) balance in 2016 was a little over $96,000, according to Vanguard’s recent “America Saves” report. Of course, that’s hardly enough for the average employee to generate enough income at retirement, especially when you consider taxes and inflation.
Even though these 401(k) plans have been around since 1980 and the total assets in all private retirement plans is greater than $7 trillion, there’s still not enough money in these plans to replace the average American’s income at retirement.
The U.S. government under the Obama administration took over our healthcare system. Could the government do the same for our private retirement system?
Already, individual states are establishing retirement plans for employers with fewer than 50 employees. Is that what you want? Do you want the government managing our private retirement system?
I really hope not. You don’t have to look very far to see what the government has done with social security to get your answer. It’s a pay-as-you-go system with fewer people putting in then those who are taking out.We know that the definition of insanity is doing the same thing over and over again and expecting different results.
In addition, the Department of Labor’s new enforceable fiduciary standard of care will put an even greater spotlight on your responsibilities as a plan sponsor fiduciary and the responsibilities of all of your service providers.
Now is not the time to sit back with a “business as usual” attitude. There are significant cost-effective strategies you can implement now to protect your company and positively impact your employees. If you focus on things like savings rates, income replacement ratios, fees and expenses, and investment performance, you can make measurable improvements to your plan’s health.
Stay tuned for my next video, where I’ll cover how much an employee needs to save, how to use the Rule of 72, and how to keep the government’s hands off your 401(k) plan.
If you’re ready to take action to improve your retirement plan health and its ability to help your employees create retirement income for life, you can visit me at www.retirementcfo.com or pick up the phone and give me a call.
If you want to learn about a next-generation retirement plan solution that can help you outsource over 90% of the liability and administrative hassles of running a retirement plan, check out www.selectretirementplans.com.
If you have any other questions or there is anything else I can help you with, fee free to reach out to me by phone or email. I look forward to speaking with you.