In a study of more than 450 private and public higher
education institutions, Sibson Consulting found only 9% of private universities
offer a defined benefit (DB) plan.
At the same time, the vast majority utilize defined
contribution (DC) plans at 99%.
However, most public institutions offer both: 87% offer a DB plan, and 91% of those offer a DC plan. This is common for state retirement
strategies as employees are given the ability to select an optional retirement
plan, Sibson says.
The College & University Benefits Study,
conducted in 2015, finds 77% of all DC plans included contributions almost
three times greater than corporate contributions in 401(k) plans. For
universities that utilize DC plans, the study finds the median institution
contribution to be 9%, with a 25th percentile at 7.1% and a mean contribution
of 8.7%.
Immediate vesting in DC plans appears to be slowly
diminishing, the study concludes. Close to 30% of institutions have begun to
apply service requirements, a change Sibson urges every institution to consider
due to high employee retention rates. Out of the 30% who have implemented a
vesting schedule, most now require three or more years of service.
Vendor consolidation, which still offers many investment
options for reduced prices, grew at a slower pace, with only two-thirds of
institutions utilizing one or two DC plan administration vendors. Sibson notes
that more vendors does not equal better options. Sibson says only institutions
with more than four active vendors will continue to consolidate vendors, and
employees should take advantage of the change, as the change may provide
significant outcomes regarding retirement.
A survey of more than 1,800
Americans in a relationship, defined as those who are married or living
with a partner, found that savings inaction, failure to share financial
specifics with their significant other and reliance on overly
conservative investments, may be jeopardizing their chances of achieving
a happily-ever-after retirement.
One in three Americans in a
relationship (33%) report that neither they nor their partners are
saving for retirement. Among the 36% of Americans in a relationship who
report that their partner is saving for retirement, roughly one in five
(23%) say they do not know how much their partner contributes to
long-term retirement accounts or have even a general sense of the total
value of their partner’s retirement account (21%). In addition, 21% of
Americans in a relationship who are personally saving for retirement say
their partner doesn’t know how much they are contributing to their
long-term retirement savings.
Dayana Yochim, investing specialist
for San Francisco-based NerdWallet who works in Alexandria, Virginia,
says, “One of the big reasons couples don’t discuss retirement savings
is it’s a distant, fuzzy target. It gets pushed to the back burner
behind more immediate needs and goals. While it’s natural to focus on
these, it is important to know the state of the financial union.”
Yochim
tells PLANSPONSOR there are advantages to being part of a couple, and
by not talking about retirement savings, they could be leaving money on
the table and shortchanging their future together. “They should be
working together to maximize every dollar in the household. Togetherness
is very powerful,” she says.
NEXT: Using the right savings vehicle makes a difference
The survey found lack of
communication also plagues those who are saving and use accounts with
brokerage firms to save for retirement, with 43% of respondents stating
that they do not consult with their partner about trading decisions
regarding their brokerage account.
Yochim explains, “Often we see
one person more engaged in the logistics of saving for retirement.
That’s fine if that’s the person’s strong suit and what they bring to
the relationship. But they should keep their partner informed. What if
that person dies or becomes incapacitated and is unable to do those
duties anymore? If their partner is in the dark, he or she won’t know
what to do.”
Thirty-nine percent of Americans in a relationship
who are saving for retirement use a workplace retirement savings plan,
such as a 401(k) or 403(b). However, the second most common account
Americans in a relationship use for their long-term investments is a
bank savings account (31%), despite the fact that these accounts
typically pay minimal interest.
NerdWallet explains that the
financial advantages of investing money earmarked for retirement in an
account designed for that purpose are clear: In 30 years, a couple that
saves $5,000 a year in a Roth IRA earning a 5% average annual return
will have approximately $332,000 in savings—$180,000 more than if they
let their money languish in a bank savings account earning 0.1%
interest.
Yochim says plan sponsors and advisers can help with general education about which accounts are best for saving for retirement.
NEXT: What plan sponsors and advisers can do to get the calculations started
Three out of four (76%) survey
respondents in a relationship, where at least one partner is saving for
retirement, say they’ve discussed general retirement planning issues
such as at what age they want to retire, where they want to live and
what they want to do. But the conversation seems to trail off when it
comes to calculating the specifics. Thirty percent of survey respondents
in a relationship who report at least one partner is saving for
retirement say they do not talk to their significant other about how
much money they will need to retire.
Again, Yochim says,
education is key to help couples start crunching the numbers. General
education should help employees prioritize all financial demands and
provide basic rules for finances, such as paying off high-interest debt,
having an emergency fund and balancing college savings and retirement.
Plan sponsors and advisers can also utilize available resources, such as
calculators and planning tools, to help couples see how to create a
plan for their financial future.
Yochim suggests plan sponsors or
advisers host a financial health day and invite employees’ partners to
discuss retirement goals and their savings plan.
“When partners
are on the same page and excited, it is a lot easier to get them talking
together. Being able to include other members of the household in these
decisions and give them a checkup about the state of their financial
union will help get conversations started and help couples improve their
future financial situation,” she concludes.