Lowell says if a DC plan sponsor
adopts a model for participants to use, it should roll out an
educational program to help participants use the model in a way that is
prudent and informed. Plan sponsors should explain the parameters of the
model and what participants might think about when running those
parameters. “Obviously plan sponsors have to limit how much to say to
participants, but they can say participants may consider work stoppages
they may have for personal reasons or changes in lifestyle that may
cause them to change deferrals,” he says.
other things plan sponsors can do to better position participants for
success. They can target new hires—especially mid- and late-career
hires—with communication that invites them to save at a rate similar to
what they did at their prior job, not just at the new employer’s auto
deferral percent. “They know they can save at a higher level because
they did at their previous job,” he says.
Plan sponsors can also change their plans to accommodate regular withdrawals, not just lump-sums.
can also choose models that help with Social Security claiming
decisions, Carrington suggests, and provide education or access to
advice that will help them fund retirement if they retire at age 65 but
claim Social Security later.
Carrington believes the retirement readiness picture is more positive than what the data shows
or what gets reported. “We look at general things, like average DC plan
balance, and that’s very distorted. We don’t take into consideration
things like savings from a participant’s whole job tenure or their
household situation. Certainly there are things we can do to improve
participants’ retirement readiness, but we don’t have to start from
scratch. Incremental improvements will enhance retirement for many
participants,” he concludes.