75% in DC plans won’t have enough for retirement, survey says

Three-quarters of defined contribution plan participants are projected to fall short of what they will need in retirement, said Christopher L. Jones, chief investment officer at Financial Engines.

In addition, he said participants under age 40 saved less in 2009 than in 2008.

Speaking Wednesday at the 2010 Profit Sharing/401(k) Council of America’s National Conference in Amelia Island, Fla., Mr. Jones gave the preliminary results of a survey of DC plan executives Financial Engines will release in October. The survey used a benchmark of 70% of preretirement income, including Social Security.

Mr. Jones also said 23% of participants had more than one-fifth of their account balances in employer stock in 2009. That number was down from 36% in 2008, with the drop due in part to a decrease in the value of the company stock, he said.

Some of the survey results support the use of managed accounts, Financial Engines’ line of business. For example, two-thirds of participants have poor asset allocations or the risk in their portfolios is inappropriate, Mr. Jones said.

The survey of 270 employers with a total of $200 billion in DC assets was conducted between September and December 2009.

During his speech Wednesday, Mr. Jones praised auto enrollment and auto escalation. “Plan design matters. … Participants in auto enrollment are better off,” he said.