In Practice May 12, 2008

Merrill Lynch Sees Strong Adoption of Roth 401(k)

The Merrill Lynch Retirement Group reported that among the 1,700 plans on its proprietary recordkeeping system, almost 200 (12%) had added a Roth 401(k) option as of the end of March.
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The Roth 401(k) is particularly popular among professional service firms, including medical practices, law firms, and consulting agencies, according to an analysis by Merrill Lynch. The company saw a 21% increase in plans adopting a Roth 401(k) feature in the first quarter of 2008, and 25% of those plans were sponsored by professional service firms.

Merrill Lynch said more than 13,000 participants (6% of those eligible plans offering the option) are contributing to a Roth 401(k) account, which was up 37% in the first quarter of 2008. The company’s total assets in Roth 401(k) accounts are $70 million, with $28 million contributed in the first three months of this year.

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Almost 20% of plans with the Roth 401(k) option have participation rates of 10% or more, and 10% of the plans have participation rates of 20% or more, the company said.

 

Data & Research May 12, 2008

Most Americans Do Not Expect Comfortable Retirement

The percentage of Americans who say they will be able to live comfortably in retirement fell to 46% from 53% a year ago, a Gallup poll found.
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“Not having enough money for retirement” was the number one consumer worry as ranked in Gallup’s most recent economy and personal finance survey.

Sixty-three percent of Americans polled said they were very or moderately worried about not having enough money for retirement, followed by 56% who had the same level of worry that they would not be able to pay medical costs associated with a serious illness or accident, and 55% who are worried they will not be able to maintain their current standard of living.

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Retirement Income

Gallup also found the forces in the economy have led to a change in ideas about where Americans will receive retirement income.

One in five future retirees expect to use part-time work as a major source of their retirement funding, which is double the 10% who had the same expectation in April 2001, said the write-up of the results.

Fifty-four percent of those who have yet to retire said they expect their 401(k), IRA, Keogh, or other retirement savings accounts to be a major source of income in retirement, which was up to two points since last year.

Social Security was the second most cited expected source of retirement income (31% of respondents), which was an increase from 27% a year ago.

Meanwhile, the percentage of those looking to a work-sponsored pension plan as a major source of retirement income fell from 31% last year to 26% this year. The percentage looking to the equity in their homes for retirement income is down from 30% to 26%.

Only 17% of future retirees indicated they expect individual stocks or mutual funds to be a major source of their retirement income, down by nearly one-third from the 24% who thought these investments would be a major source for them a year ago, Gallup said. Also, the percentage expecting their regular savings accounts or CDs to fill this role dropped from 23% to 17%.

Gallup conducted telephone interviews with 1,021 adults, aged 18 and older last month. The results can be viewed here.

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