About a month ago, I had the chance to participate in a podcast with David Blanchett, Jason Grantz, and Will Hackler on the topic of the drivers of success in retirement plans. We dove into the varying factors like participation rates, savings rates, investment allocation, and investment menus, and how they each can build valuable and worthwhile retirement benefits for your organization. In this Money Hacks video, you’ll hear more about my beliefs in what employers should offer to make their employees' financial picture successful.


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Video Transcript:

Hi again, it's Alex with AFS 401(k) Retirement Services. Welcome, to episode number 79 of Money Hacks. This is a special edition geared for retirement committee members, benefits managers, HR executives. About a month or so ago, I had the opportunity to participate in a podcast with a few other industry experts and practitioners, and the topic was around the drivers of success in retirement plans.

In most retirement committee meetings conversations come up around some different data points with respect to your 401k or your 403(b) like participation rates, savings rates, investment allocation, the different investment options that are available in the plan, and all of those conversations are really important in addition to a lot of other administrative and operational discussion topics to ensure that you have a high quality, valuable and worthwhile retirement benefit for your organization and your employees. But the podcasts that I got to participate in centered around a research study that was written, going back now, I think eight or nine years, by David Blanchett, who's head of retirement research at Morningstar and Jason Grantz at American Trust and the idea which has been shared in a number of different kinds of research studies and white papers is that the main driver of success in retirement savings is the saving rate. So, a lot of these other things that that committee has spent a lot of time on, the investment analysis and portfolio construction, again, very important is not as integral to your employee's success as the amount that they're saving in the plan.

We're big believers in that. Of course, we think about somebody's financial picture comprehensively and how they're making good decisions for their short-term, medium-term, and long-term. But it's again, I think a point of support for some of the concepts that have become very prevalent in retirement plans' features like automatic enrollment, automatic increase, and even automatic re-enrollment. So, going back to the people who have opted out and re-enrolling them again, across our client relationships today, about 70% are automatically enrolling employees into the plan, and of those somewhere, around 90% have an automatic enrollment feature so that each year employees’ deferrals go up by 1 or 2% and we've seen statistically participation rates, deferral rates, and retirement outcomes. The success of employee's ability to have enough money for retirement continued to increase over the course of the last many years because of this focus on helping people save into the plan. So, you know, we're proponents of fiduciary oversight and thinking about all the aspects of the plan that are important, but if you're a benefits manager or if you're an employee at an organization or trying to figure out how do I ensure I'm making the most of my retirement savings, the amount you're contributing, the amount you're saving on a per pay period basis, and then cumulatively across each year and your career is by far the key driver to success. So, I hope this was helpful. Check out that podcast. I'll link it in the notes, and look forward to seeing you next time.