How are the Savings Crisis and Your Company 401(k) Plan Related?
What is the Savings Crisis?
Lately, there’s been a lot of conversation about the 401(k) “Savings Crisis” in the United States. Chances are that you’ve heard about it, whether on the news, through financial media sources, or in watercooler talk at your office, but just what is this “Savings Crisis?” These numbers from the National Institute on Retirement Security will help us paint the picture:
- The U.S. retirement savings deficit is between $6.8 & $14 trillion.
- The median retirement account balance is just $3,000 for all working-age households and only $12,000 for near-retirement households. This is in stark contrast to the estimated $1-$1.5 million that it requires to retire comfortably, according to AARP.
- The typical savings rate for most people is just 1%-3% of their income.
From these numbers, we can see that the U.S. workforce is falling very short when it comes to saving the money needed to retire. Many retirement-age adults will continue working into their senior years because they do not have enough to live on without that supplemental income.
So what does your company’s 401(k) plan have to do with it?
We hear about the Savings Crisis all the time. However, we seldom hear about the fact that more than 40% of current employees do not have access to a company sponsored retirement plan according to the Bureau of Labor Statistics. This is a major reason that people of all ages in the workforce aren’t saving. So why do start-ups and small businesses continue to balk at providing this vital benefit?
- It’s too expensive
- 401(k) administration takes too much time
- 401(k)’s only work with bigger companies
- Employers don’t care to start a company-sponsored 401 retirement plan.
The actual reality is that setting up a modern 401(k) plan is easy and cost-efficient. Technology has made it possible for companies of all sizes to provide 401(k) plans without the expensive and time-consuming processes of the past. Today, a start-up or small business owner can set up a brand new plan with just a couple of phone calls. Employees can then contribute in as little as 45 days.
Four in five employees (including 9 in 10 Millennials) indicate that that they would like benefits and perks more than a pay raise according to a recent Glassdoor Survey. Furthermore, a 2017 Deloitte survey found that, when employees were asked about the most important financial wellness concerns, 58% responded a “Lack of Retirement Readiness.”
The trends are showing that most Americans have had the realization that they are not saving enough to reach their retirement goals. The surefire way to make savings front and center is to ensure everyone has access to a quality company-sponsored retirement plan. For employers, this is the easiest, but most important business decision you can make for your workforce’s well-being.
Located in Denver, Colorado with a satellite office in Metairie, LA, LT Trust is a low-cost 401(k), open architecture 401(k) recordkeeper that helps financial advisors and plan sponsors to achieve retirement readiness. With a focus on small business 401(k)s, LT Trust is on a mission to provide cost-efficient retirement plans without compromising quality or customer service.