Editorial | Published in July 2012

Turning Up the Heat

We’re in the middle of a heat wave in New York City, and the oppressive temperature and humidity makes one not want to consider leaving the comforts of home—and the air-conditioning.

By Alison Cooke Mintzer | July 2012
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As lovely as that idea sounds, it’s not possible because most of my day takes place outside my apartment (thanks especially to my very active 2-year-old, for whom being cooped up at home is equivalent to punishment).

Much as it is impossible for me to ignore the realities of the heat outside—forcing me to grin and bear the temperatures—the retirement industry is no longer ignoring the realities of what it means to retire on a 401(k), and everyone, from providers to plan sponsors to the media, is focusing on more than just participation rates.

Not that the issue was ignored before—perhaps that’s the wrong word—but it was not the front-and-center discussion for most plan sponsors. However, with the phrase of the moment being “retirement readiness,” and survey after survey showing preretirees concerned about their savings lasting through retirement and those of postretirement age trying to stay in the work force to supplement their savings, clearly the notion of being ready for a traditional retirement is changing.

One of the key considerations in determining whether employees are “retirement-ready” is how much they have saved, or what they are projected to have, based on savings and investment behavior. However, the question asked in our cover story—how much is enough?—may not have a clear answer. The traditional idea that workers would need to replace between 70% and 75% of their preretirement income—i.e., what came from all sources—has been scrutinized as too low, as we see the increasing cost of health care in retirement, as well as the other financial-planning concerns workers face. In “How Much Is Enough, Anyway?” (page 28), industry experts share their thoughts about the challenges today’s participants face and how plan designs can help improve participant outcomes.

We have dedicated many pages of this magazine and much space on our website to discussing retirement income—both the needs and wants of Americans regarding how to manage their income during retirement and the various product offerings available to plan sponsors and participants. Yet, we have rarely had the opportunity to speak to a plan sponsor and hear how the products are working—or not working, as the case may be. This issue, we are able to bring you the story of an adviser and his plan sponsor client who, due to administrative challenges, were unable to add a retirement income option to the sponsor’s retirement plan. Hear what they had to say in “You Can’t Always Get What You Want” (page 54).