Retirement Security Brighter
07/25/2010 0 comments
Retirement plans are doing a better job of providing a secure retirement for workers than a decade ago, according to a study to be released Tuesday by a nonpartisan research group. Many workers, however, may still come up short.
That news of improved security may seem counterintuitive—or just plain wrong—to workers who saw their retirement accounts shrink during the recent market downturn.
But workers fared better than they would have if the credit crunch had hit years earlier, according to the Employee Benefit Research Institute, a nonpartisan research group based in Washington that conducted the study.
The improvement is thanks largely to a recent increase in automatic employee enrollment in 401(k) retirement plans, says Jack VanDerhei, lead researcher on the report.
The federal Pension Protection Act of 2006 helped trigger the bump in automatic enrollment by providing legal guidelines for employers in the private sector to place workers in 401(k) retirement plans by default, said Alan Glickstein, a senior retirement consultant for Towers Watson.
Workers can choose to opt out of the programs, but the vast majority—more than 90%—remain in the plans, according to Mr. Glickstein.
Previously, workers often had to choose to have money deducted from their paycheck to go toward their retirement.
Although the Pension Protection Act was passed in 2006, the effective dates for the changes were later, Mr. Glickstein said. The effects on retirement security are just now being felt, he said.
Labels: 401K, retirement
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