New research (thankfully) finds the recession didn’t shake retirement savers’ faith in the 401k.
The Transamerica Center for Retirement Studies (TCRS) found household savings in 401k and similar accounts shot up when compared to pre-2008 numbers—a finding contradictory to alternative claims that many participants stopped or scaled back contributions post-recession.
In A Retirement Security Retrospective: 2007 Versus 2017, data show:
- Millennials’ median account balance rose from $9,000 in 2007 to $36,000 10 years later
- Generation X workers’ median increased from $32,000 to $71,000
- Baby Boomers’ median grew from $75,000 to $157,000
“American workers encountered a myriad of challenges over the past decade, including high rates of unemployment, dramatic shifts in home values and volatility in the financial markets. While many workers are still recovering from the Great Recession, the good news is that many have seen improvements in their future retirement security,” Catherine Collinson, CEO and president of Transamerica Institute and TCRS, said in a statement.
Other stats held steady between 2007 and 2017. The number of employers offering 401ks or similar plans has stalled at 72 percent. Only one in five plans offered auto-enrollment last year, just like ten years earlier. And 80 percent of eligible employees were participating last year, compared to 77 percent a decade earlier.
“People now have the potential of living longer than any other time in history—which means that workers want and need to extend their working lives to fund what promises to be very long retirements. Our retirement system, including Social Security, employer benefits and employment practices, should be modernized to embrace this new reality so that all workers have the opportunity to retire and grow old with a financial peace of mind,” Collinson added.
With that, TCRS offered the following recommendations:
- Workers ultimately “own” their future retirement but many are not yet taking action steps to increase their likelihood of success. Specific action steps include: creating a budget and financial plan, building emergency savings, saving for retirement, learning more about retirement investing and seeking professional advice.
- By offering benefits, employers help employees save for retirement and protect their health and financial well-being. If they do not already, employers should consider offering these benefits. Among those that do, employers should periodically review their offerings to ensure they are up-to-date and meeting employees’ needs.
- Policymakers must pave the way for employers by making it easier for them to offer retirement benefits. Specific public policy recommendations include: expanding retirement plan coverage for all workers (including part-timers); encouraging employers to adopt “automatic” features that make it more convenient for workers to save; and promoting more accurate goal-setting among participants by requiring retirement plan account statements to provide an illustration of savings as future retirement income.
Jessa Claeys is a writer, editor and graphic designer.
