Client Service March 7, 2017

Vanguard Recommends Plans Accommodate Retiring Workers

Allowing for partial withdrawals is among five tips the investment firm gives.
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Vanguard believes that retirement plan sponsors should not just help their current workers but those who have retired, and to accomplish this, the investment firm has five recommendations centered around allowing retirees to keep their money in the plan and create income streams.

As many plans force people to cash out when they reach a certain age, such as 65 or 70.5, Vanguard is asking plans to consider lifting such requirements. Vanguard further invites plans to permit retirees to take partial, ad hoc distributions. Currently, only 13% of plans permit this, Vanguard says.

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Just as plans permit new employees to roll over assets from previous plans to consolidate their assets and better manage them, Vanguard believes that plans should open the gates to permit retirees to include outside assets.

Next, Vanguard reminds sponsors that even retirees need to grow their assets. In order to do this, the firm believes plans should offer investment options for retirees. And finally, Vanguard says education and advice should be available to a plan’s retirees.

“Today, about 80% of DC participants decide to leave their plan within five years of retirement, either by rolling over to an IRA or cashing out,” says Martha King, managing director of Vanguard Institutional Investor Group. “At Vanguard, we believe many of these participants can be well served by staying in their plans, where they can benefit from employers’ fiduciary oversight and low-cost investments. Creating a DC plan that serves as a destination for employees beyond their retirement milestone is not a simple decision, but it’s certainly an important one.”

Data & Research March 7, 2017

Americans Falling Behind on Retirement Savings

Those who feel they are financially savvy do far better than those who do not.
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More than half, 52%, of American workers do not think they are saving enough for retirement, Investopedia found in a survey of 700 employed investors. That number jumps to 58% among novice investors. On the other hand, expert investors are seven times more likely to be ahead of their goals, Investopedia found.

“That more than half of Americans with above-average savings feel that they have inadequate retirement savings is a nationwide problem that needs to be addressed,” says David Siegel, chief executive officer of Investopedia. “These concerns coming from investors will only be magnified when looking at the general population. The first step to alleviating this burden and getting people on track is education.”

The survey also found that 78% of those who feel they are behind on their retirement savings contribute to a workplace retirement plan, which indicates, Investopedia says, that people need to make additional efforts to save.

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Only 18% of those who participate in their retirement plan receive professional advice. A mere 10% think they are ahead on their retirement savings. Among this group, 82% have an individual retirement account (IRA). For those who think they are on track, 52% have an IRA, and among those who are behind, only 33% have an IRA.

Another 28% of the survey respondents think they are on track, and the remaining 10% were unsure of their status as it relates to retirement savings.

Among those 50 or older, 60% are afraid they may have to delay their retirement, and the cost of health care is their biggest concern. Among Millennials, 81% are worried that Social Security may not exist by the time they retire.

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