Developed by LMRAC, with significant input from Diversified, the white paper examines the coming retirement savings shortfall and calls on the retirement industry, employers, working Americans, financial intermediariesand the federal government to come together to develop solutions that improve the savings rate.
“Solving the retirement savings crisis has to be a team effort,” said Gary Kleinschmidt, head of Retirement for Legg Mason.“To preserve the American dream of retirement, all key stakeholders must commit to working together to develop new solutions that enhance the financial literacy and retirement savings of American workers.”
Among the recommendations for key stakeholders highlighted in “The Savings Crisis of Working Americans: The Retirement Industry Call to Action” are:
- The retirement industry — Defined contribution (DC) providers and asset managers must look to develop products and services that enhance defined contribution plans and platforms to encourage greater participation. The industry should also apply lessons learned from the DC plan design to improve the growth of Individual Retirement Accounts (IRAs) — particularly for employees without access to DC plans.
- Employers/plan sponsors — Companies offering a DC plan should commit to improving the quality of their communications and educational initiatives and consider offering access to professional guidance designed to help employees better prepare for retirement. Smaller companies that do not offer a DC plan for their employees should consider taking advantage of solutions developed by payroll service providers and other retirement plan industry participants.
- Financial advisers/consultants — In addition to over-communicating the importance of saving more to better prepare for retirement, financial intermediaries must serve as an advocate for their clients by working closely with plan sponsors to promote transparency and enhance their knowledge and abilities.
- The federal government — To provide the ability for all Americans to save at work, the government should strive to create solutions that incentivize all employers — regardless of their size — to offer retirement plans.
- Working Americans — Save more. To start, consider a simple saving strategy characterized by the football term First & 10. First, get started by enrolling in a dedicated retirement savings account such as a 401(k) offered by your employer; or open an IRA. With the account in place, try to save at least 10% of your income in this retirement savings vehicle — a savings rate that would be nearly double the national average.
To download a copy of “The Savings Crisis of Working Americans: The Retirement Industry Call to Action,” click here.