... and other ways to strengthen the retirement system
|Christine Marcks says while Pension Protection Act "helped spur great progress," there is more work to do.
“The Pension Protection Act helped spur great progress from a plan design perspective, in particular paving the way for automatic enrollment, automatic contribution escalation and qualified default investment alternatives,” Marcks explained. “It is now time for us as an industry to focus our attention on the next set of upgrades.”
One of the first upgrades she suggests would include increasing minimum default contribution rates to 6 percent from today’s average 3 percent. According to Marcks, 3 percent isn’t enough to ensure a secure retirement for most, especially if the plan does not include automatic contribution escalation. Another change Marcks called for was shifting the conversation from account balances to how much retirement income that account balance will provide. And third, build lifetime income guarantees into defined contribution plans.
Marcks also stressed the importance of collaborating with policymakers to expand access to retirement plans for the nearly half of American workers who currently don't have access to a retirement plan at work. In addition, using behavioral finance to personalize retirement and show employees how to overcome inherent challenges that deter them from achieving long-term financial security is a significant advantage.
Want more information? Watch a video of Christine address the behavioral roadblocks to saving for retirement.