Maryniw and Maryniw: Now is the time to close $5 trillion retirement income gap

Retirement readiness income models project a $5 trillion retirement income shortfall for retirees. It’s time to build better outcomes, and it is clear now is the time for plan sponsors to take action and help participants close that gap. Now may be the ideal time to help as participants’ portfolios bounce back.

Over the past decade, two bear markets, a financial crisis and high levels of volatility have changed participants’ behavior, possibly jeopardizing participant retirement readiness. Recent studies show 82 percent of employees are willing to contribute a portion of their salaries to put toward retirement and that favorable benefits are a key factor to 80 percent of employees when considering a job offer. But interest and participation could be even higher. Employers could raise participation rates by integrating 401(k) enrollment with health plan enrollment and through automatic enrollment, automatic increases and redesigned employer match to increase contributions. The vast majority of employers, 83 percent, offer an employer match, and 39 percent do so dollar for dollar.  

Action steps plan sponsors can take to improve retirement plan savings rates include the following:

• Understand why employees are not participating.

• Examine participant behaviors within the plan.

• Identify participants not exploiting employers’ match.

• Help participants understand retirement risk.

• Consider using an employer match if not currently.

Studies show that in 2013, participant rates were 67 percent. Plans with auto enrollment have participation rates of almost 90 percent across all groups. Nearly 60 percent of participants never change their deferral rate from the default rate. Participant opt out rates do not increase when the default rates increase to 6 percent. A 10 percent to 15 percent total saving rate (combined employee and employer contribution) is recommended by many plan vendors and advisers. Some 92 percent of employees say one reason they participate is a company match.

Another component that employees desperately need is advice, guidance and metrics to enhance their financial wellness. This advice can be found through the plan’s adviser and selection from plan vendor.  

Other factors that will affect participants retirement outcome are rising health costs. We need to help participants recognize and plan for this key risk, which has the potential to erode retirement savings.

Research indicates a 65 year old couple with a typical life expectancy may need $254,000 to pay for uncovered medical costs during retirement. Costs increase with longevity; uncovered medical expenses for a couple who live beyond their life expectancy may total $325,000 over 30 years.  

Plan sponsors need to review and redesign their plans to engage the employee. 

Arranging educational meetings between the participants and the plan’s financial adviser can be a starting point. Advisers who are able to connect with the participants can help increase participation and enrollment. Some plans do not have an adviser. This a missed opportunity for the plan sponsor to have someone advocate on their behalf of what a great plan they offer. If no one communicates the vested interest the plan sponsor has in its employees’ retirement outcome, then a 401(k) plan is just a plan.

• Terry Maryniw and Aaron Maryniw are investment advisers with Maryniw Financial, 910 E. Oak St., Lake in the Hills. Contact them at, 847-658-9251 or visit 

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