Editor’s Note: This is the latest in a series of posts about the 2013 NAPA/ASPPA Summit, March 3-5, 2013 in Las Vegas. C. Todd Lacey, Senior Vice President, Transamerica Retirement Solutions, and co-chair of this year's conference, addresses the critically important task facing advisors: how to do a better job, as an industry and as a nation, to help prepare tomorrow’s retirees for the challenges they face.
By C. Todd Lacey
As members of the retirement industry, we’re all acutely aware of the plentiful and painful shortcomings of our nation’s system for providing retirees with security and dignity after a lifetime of work. We know that individuals aren’t saving enough, plan sponsors aren’t encouraging them enough, and government officials and policymakers aren’t helping them enough. It has fallen on us, as a result, to seize the initiative and lead the way in making retirement readiness a national priority.
Adding our Voice to the Call for Improvements
As a call to action in driving better results for our retirees, Stig Nybo, president of Transamerica Retirement Solutions, has authored a carefully researched book on the subject, “Awakening the Super Saver: In Pursuit of Retirement Readiness.” Stig’s premise is pretty simple:
• Individuals have a responsibility to save more, making it a priority not an afterthought;
• Sponsors of retirement plans need to emphasize positive outcomes, adopting design features and provisions that encourage productive behaviors; and
• Industry professionals (like those of us planning to gather at the 401(k) Summit) need to make tough, unpopular recommendations where necessary in advising their clients.
Aiming for 90-10-90, with Specific Guidelines
Platitudes about saving and retirement preparedness abound, but specific, comprehensive guidelines are hard to find. Guided in part by the work of Shlomo Benartzi, UCLA professor and behavioral economist, Stig identifies an overall objective of having 90% average enrollment in all DC plans, an average deferral rate of 10% and 90% of participants selecting or getting defaulted into a professionally managed asset allocation portfolio.
To get there, he envisions using plan design modifications that don’t leave positive outcomes to chance:
• automatic enrollment;
• higher initial deferral percentages for auto-enrollment — like 6%, for example;
• automatic contribution escalation; and
• automatic, default investment in a professionally managed Qualified Default Investment Alternative (QDIA), such as a target date solution.
And finally, to ensure a fully funded retirement, participants should have access to a guaranteed income vehicle to ensure a lifetime stream of income.
Let’s Be Part of a Meaningful Solution
We are justifiably proud of our work in an industry that seeks to provide our nation’s aging workers with security and confidence in their retirement. It’s important and enormously satisfying work. But we simply need to do a better job, as an industry and as a nation, to help prepare tomorrow’s retirees for the challenges they face. I hope you’ll join with Transamerica as we seek to improve our retirement system and address a societal problem that has reached crisis proportions.
Let’s talk about it in Las Vegas!
Lacey is co-chair of the 2013 NAPA/ASPPA 401(k) Summit.
Transamerica Retirement Solutions does not provide tax, legal, insurance, or investment advice and nothing presented herein should be construed as a recommendation to purchase or sell a particular investment or follow any investment technique or strategy.
FA - 11766 (2/13) ©2013 Transamerica Retirement Solutions Corporation. Used by permission.
