PSI Newsletter and Website Header 10.2.15

Recently ThinkAdvisor shared some scary retirement statistics from a report by the National Association of Government Defined Contribution Administrators, Inc. (NAGDCA). These retirement statistics paint an alarming picture of most American’s state of retirement readiness. I have shared four of the more troubling retirement statistics below, and then outlined four quick, low-cost solutions you can implement to help your employees.

1. More than 75% of workers don’t believe they will have enough money in retirement

Most Americans are passing through their working lifetimes with the belief that their retirement days are going to be difficult, not something to look forward to.

2. Retirement statistics show half of American workers have NO retirement savings

Unfortunately, looking at the portion of Americans that have saved something doesn’t yield a better picture. According to ThinkAdvisor, the median retirement account balance is only $3,000 for working-age households and only $12,000 for households approaching retirement.

3. Funding 20 years of retirement

Most workers will probably retire at or before age 65. That means they will have 20 years or more of retirement to fund. Given that most Americans haven’t saved enough to fund even one year’s worth of retirement, this is a major problem.

4. Each retiree will need at least $220,000 for health care

This will only pay for out-of-pocket medical costs. It doesn’t include long-term care costs or health care premiums and is likely to grow as retirees live longer and health care costs rise.

What Employers Can Do To Help

1. Change the way you educate

Employee 401k education over the years has been remarkably unsuccessful. American workers wouldn’t find themselves in such a dreadful state of unpreparedness if even a small portion of the education they received resonated with them. So try something different. Many progressive employers are coupling employee 401k and financial wellness education in an online format of 10 to 15 minute downloadable modules. There are many advantages to online, on-demand education. Give it a try since it is likely that whatever you have been doing is not working.

2. Eliminate leakage

The quickest and easiest thing employers can do to protect employees from themselves is to eliminate all loan and withdrawal options from their 401k plans. For many employees, it is just too tempting to view their 401k plan account as a savings account.

3. Automate savings

Recent retirement statistics show that employees need to save at least 15% into their 401k accounts each year. You can help them through auto enrollment and auto escalation. Auto-enroll all new employees at 5% and escalate everyone 1% higher each year until they reach 10%. Re-enroll everyone who isn’t in the plan each year and map anyone you auto enroll into the appropriate target date fund.

4. Provide investment advice

I believe in three years nearly all 401k plans will offer some form of participant investment advice. Many recordkeepers offer this service now, some for free. This is another way of protecting employees from themselves. Bad investment decisions are a major reason most participants aren’t on the road to retirement readiness.

There is a lot of room for improvement in the average American worker’s state of retirement readiness. Don’t be afraid to be a disrupter and radically change your 401k retirement program.


About the Author

Robert C. Lawton, AIF, CRPS is the founder and President of Lawton Retirement Plan Consultants, LLC. Mr. Lawton has over 30 years of retirement plan consulting and administration experience and has provided consulting services to many Fortune 500 companies including: Aon Hewitt, Apple Inc., AT&T, First Interstate Bank, Florida Power & Light, General Dynamics, Houghton Mifflin Harcourt, IBM, John Deere, Mazda Motor Car Company, Northwestern Mutual, Northern Trust Company, Trek Bikes, Tribune Company, Underwriters Labs and many others. Mr. Lawton may be contacted at (414) 828-4015 or

About Lawton Retirement Plan Consultants, LLC

Lawton Retirement Plan Consultants, LLC is a Milwaukee, Wisconsin-based independent, objective Registered Investment Advisory (RIA) firm providing investment advisory, fiduciary compliance, employee education, vendor management and plan design services to 401(k) plan sponsors. The firm currently has contracts in place to provide consulting services on more than $400 million in plan assets. For more information, please contact Robert C. Lawton at (414) 828-4015 or or visit the firm’s website at: Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser.

Important Disclosures

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance, tax, legal or investment advice. Each plan has unique requirements and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does Lawton Retirement Plan Consultants, LLC assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations. Investors should carefully consider investment objectives, risks, charges and expenses. The statements in this publication are the opinions and beliefs of the commentator expressed when the commentary was made and are not intended to represent that person’s opinions and beliefs at any other time. The commentary does not necessarily reflect the opinion of Lawton Retirement Plan Consultants, LLC and should not be construed as recommendations or investment advice. Lawton Retirement Plan Consultants, LLC offers no tax, legal or accounting advice and any advice contained herein is not specific to any individual, entity or retirement plan, but rather general in nature and, therefore, should not be relied upon for specific investment situations. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser and accepts clients outside of Wisconsin based upon applicable state registration regulations and the “de minimus” exception.