MassMutual is employing big data in efforts to analyze 401(k) saving habits, and the news isn’t good.
The investment behemoth reports that 45 percent of retirement plan savers are off target on saving enough to continue their lifestyles in retirement, according to an analysis of 401(k)s and other retirement plans served by MassMutual.
However, the analysis also shows that many more retirement savers could become retirement ready if more employers incorporate fundamental improvements to their retirement plans such as automatic enrollment.
The data for the analysis was generated by a suite of tools available through MassMutual’s PlanALYTICS program, which is used by MassMutual to measure the relative effectiveness of retirement plans and the retirement readiness of employees who participate in those plans.
After launching the program in 2013, MassMutual now has approximately two years of data on retirement plans and their participants, and is using its findings to encourage retirement plan sponsors and participants to take steps to boost retirement readiness.
Although the program reports that 54.4 percent of plan participants are on target for retirement, the percentage could rise to 69.4 percent if employers incorporate plan design changes such as automatic enrollment and automatic deferral increases, and encourage savings by matching employee contributions. Sponsors that incorporate those improvements typically show improved outcomes over time based on MassMutual’s retirement plan data, she said.
In early July, MassMutual published a book on the retirement plan health program, “Precisely, Driving Greater Retirement Readiness through MassMutual’s PlanALYTICS”, reporting on the theory behind the approach, how it works and why. The book will be available to plan sponsors and financial advisors to encourage improved outcomes for retirement plans and their participants.
See Also:
- 401(K) Auto-Enrollment: ‘Great Tool, but Incomplete
- 3 Popular 401(k) Plan Features Closely Scrutinized
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
I think that if employers matched a higher dollar amount rather than fixed % of employee contribution particularly for the lower income group (under 50K)then we will see more participation and higher savings growth in the 401(k) plans. This will be more fair to the lower income employees and will increase the wealth of the under 50K workers through out the USA and over time it will decrease the wealth gap.