People who make a living serving the DC market should be forgiven if sometimes they feel like one of those cowboys in an old Western, when the bad guy yells, "Dance, Podner!"and the bullets fly every which way. Getting shot at comes with the territory, it seems. In that vein, Ascensus’ Todd Berghuis deconstructs and then rebuts three prevalent criticisms of the industry:
• Plan participation and savings rates are lower than expected, and contribution rates have actually declined. “That is truly a red herring,” says Berghuis. In some plans deferral rates have seen declines, at least temporarily, when participants who were already deferring substantially did not affirmatively reset at their previous deferral level. But what has also happened is that more participants are actually deferring in these types of plans. Going forward, an auto-increase feature will become a valuable tool when more employers implement it, Berghuis notes.
• Government-mandated contributions coupled with government-funded stream-of-income payments — a scheme pushed by many academics — is the solution to the retirement income problem. Noting that the academics who lead retirement research centers at prestigious universities typically have post-retirement benefit guarantees that don’t depend on the whims of the economy or the investment skills of the participant, Berghuis points out that the political calculus to "mandate" such a plan does not exist — “certainly not now and likely not for a long time to come.”
• The numbers tell us that as a nation, we are failing at saving for retirement. In fact, Berghuis says, the numbers from groups like ABC, ICI and ACLI (not to mention EBRI and ASPPA) paint a picture of a glass that is half full, not half empty. “There is no free lunch, no magic bullet, no easy solution to saving enough for retirement,” he notes. “Let’s not be so preoccupied with the pursuit of the perfect that we fail to appreciate the good in existing retirement saving options, and the great amount there is of it.”
