Workers shorted on retirement readiness
By Nancy K. Webman | December 24, 2012
Defined contribution plan executives and their service providers are doing a lousy job getting participants prepared for retirement.
Harsh words, I know, but I have proof: the inadequacy of the overwhelming majority of the two dozen Eddy Award entries in the “retirement readiness” category, which we added this year.
The awards recognize best practices in educating plan participants, so the forms the judges use to evaluate entries list every possible component of a best-practices program.
Alas, most of the entries in the retirement readiness category contained very few of those components.
For starters, most failed to discuss anything but their DC plan, and contained nothing, for example, about any possible defined benefit plan, or Social Security, or personal savings, or a spouse's retirement programs.
So while the entries showed participants how to calculate how much they can expect in retirement from that DC plan — and how they could increase that amount through their deferral rate — that's about all they did.
In retirement readiness, judges were to pick the winners using such criteria as whether participants have the tools to project what is needed to maintain their current living standards, including covering their medical and long-term-care costs. Only one entry discussed the medical/long-term issue in any detail. And only a couple even mentioned post-retirement health-care costs at all.
Judges also checked to see whether the entries clearly explained retirement income options such as annuities as investment options, annuities at distribution or structured payouts. Almost none did so.
Interactive tools were sought after by judges, and the more an entry had, the more points it was awarded. Most got zero points or one point.
Extra points could be awarded for the availability, and frequency, of retirement readiness educational meetings or webinars. Not many entries got any points for that.
I could go on, but you get the picture: It is the plan participant who is ultimately hurt by the crummy retirement readiness programs their employers and service providers offer.
This article originally appeared in the December 24, 2012 print issue as, "Workers shorted on retirement readiness".