Pushing saving beyond what people consider “normal” was the focus of an April 18 workshop session at the NAPA 401(k) Summit.
Panelists Phil Fiore, UBS Financial Services Senior Vice President, FDG Group; Randall Long, SageView Advisory Group Managing Principal; and Michael Whitehurst, Merrill Lynch-Bank of America Vice President, offered their insights at the session.
Whitehurst advocated encouraging participants to establish what he calls a "SWAN" fund — a fund whose saving level is high enough that one can sleep well at night. This is especially important for young savers, who, he asserted, “just don’t get compounding” and need help in understanding future value and in setting life priorities.
“Participants really want help — they just don’t know how to get it,” said Fiore. “We’re trying to teach people little tricks to add more to their 401(k).”
But reaching plan sponsors is key, too, Fiore argued. He said that “there’s a weird defensive posture some plan sponsors have” and that there is a need to be more dynamic regarding matches. “Some plan sponsors want to save money,” he said, “but one way or another, we’re going to pay for it” — whether it’s through higher matches or the need for society to provide more support due to insufficient retirement saving by individuals.
Long used a similar line of reasoning in support of auto-escalation. He said that with auto-enrollment, “inertia takes over” if there is no auto-escalation. “A lot of people are undersaving,” he observed.
Asked about the stigma that employer involvement in employees’ retirement saving constitutes paternalism, Long responded that it will be overcome with time. Fiore had no patience with the notion. “Plan sponsors that hide behind that are enormously ill-informed,” he said, adding that they are “absolutely wrong” if they say retirement plan involvement is not their responsibility and that it is “incumbent upon them” to be involved.
Looking into the crystal ball, Long said that he “sees down the road a convergence of health care and retirement. He said that he thought the idea an attendee floated about a "financial Fitbit" was “spot on.” Whitehurst agreed and said that “gamification is something a plan sponsor can do to increase participation.”
The bottom line? Said Whitehurst, “What’s important is the difference we make in our plan sponsors’ lives.”
