Employer-sponsored 401(k) retirement-savings plans include more features and options than ever before. That’s the good news, benefits experts say, in a generally bleak retirement picture for people whose nest eggs got hammered by the market meltdown of 2008 and who are finding it difficult to save in a tough economy. But the glad tidings come with a caveat: Additional choices are good only if plan participants understand the choices they are making and select wisely.
Want to put your account on autopilot and let professional money managers handle it? Studies show that growing numbers of employers offer 401(k) plans that include options ranging from automatic escalation of your annual contributions and automatic rebalancing of your asset allocations to fully managed accounts in which (for an additional fee) advisors make investment decisions for you.
Want more control of your investment decisions instead of less? Plans also are increasingly likely to offer a self-management option that lets you pick investments you like instead of just choosing among a dozen or so funds offered by the plan provider. Growing numbers of plans also offer built-in features ranging from annuities to automatic enrollment.
While they agree that a wider range of options is good in principle, experts in the Twin Cities and elsewhere have reservations about whether the proliferation of choices will add up to better retirement outcomes. And many say that the addition of new plan features does not counterbalance a larger trend toward cost-cutting in 401(k) plans.
Cutting Back
Prior to the market crash that began in 2008 and plunged the economy into recession, “we saw a drive toward better overall retirement outcomes for participants,” says Tony Cardinal, who runs the retirement division of Financial Concepts, Inc., in Plymouth, a firm that offers consulting services and fiduciary oversight for benefit packages. “Now we see much less concern for that, and more emphasis on cost cutting.”
In some cases, cost-cutting has meant recession-driven moves to reduce or suspend employer-match contributions to 401(k) accounts. Surveys last year by financial advisory firms Hewitt Associates and Towers Watson, both weighted toward large employers, found that about 10 or 12 percent had made such moves.
Far more often, Cardinal says, cost cutting has taken the form of an emphasis on reducing administrative costs by shopping for new plan providers or pressuring the current provider to lower its fees.
