Our View on Retirement Readiness: How to Move from a "Popular" Plan to a Successful Plan
It is one thing to provide a retirement plan. It's quite another to ensure that employees participate at savings levels that will really help get them ready to retire. While plan sponsors understand the value of a retirement plan for attracting and retaining quality employees, increasingly they are concerned about another important outcome: are participants really on track to retire securely?
In fact, nearly two-thirds of plan sponsors feel they have a personal obligation to prepare their employees for retirement, and retirement readiness was ranked as the most important improvement with which plan sponsors want providers to help. In a survey of plan sponsor attitudes conducted by Harris Interactive on behalf of the Principal Financial Group®, The Principal Retirement Readiness Survey found that plan sponsors are willing to make changes that would improve retirement readiness.
In the past, financial professionals, plan sponsors and their service providers have generally measured success by looking at plan participation rates. While an analysis of participation certainly provides insight into how well-used a plan is by a company's employees, it does not actually provide any insight into whether the plan is producing the desired results for its participants. Instead, we argue that a "successful" plan is one that delivers participants to retirement, prepared and with sufficient retirement savings to support their lifestyles for the rest of their non-working lives.
But how do plan sponsors know if a plan is helping participants to retirement readiness? In an era of increasingly longer life spans and increasing responsibility for saving on the shoulders of participants, traditional measures of participation and salary deferral rates no longer tell the full story. Popular doesn't always mean successful when it comes to retirement plans. We need to shift the conversation toward calculating retirement income replacement ratios at the plan level.
Get the full report
Download our view on retirement readiness now (PDF: 445 KB)
- Annual 401(k) Survey Retirement Readiness, Deloitte, 2010.
- 2011 Principal Financial Group Retirement Readiness Survey commissioned by the Principal Financial Group conducted by Harris Interactive online. Data was gathered May 17 through June 17, 2011 from 1,300 employers.