With most American’s not having saved enough for retirement, it’s not difficult to realize the solution to the problem is to increase savings rates during workers’ earning years. However, 401k deferral rates have increased very, very little over time. In data compiled from Fidelity Investments, Vanguard, T Rowe Price and The Plan Sponsor Council of America, the improvement in employee deferral rate since 2010 has increased as little as 0.37% per year(1). By comparison, Wellspring Financial Partners’ clients have seen an average improvement in their salary deferrals of 5.59 %(2). That’s a multiple of 3 to 4 times what the well know national recordkeepers and plan sponsor Organizations are reporting.
Wellspring provides group employee education sessions, enrollment assistance, one-on-one advice to employees for both their 401(k) plan as well as any additional financial topic and there is no additional charge for this service to employees. Financial planning is also available to every plan participant at a very nominal cost. The bottom line is that employees’ needs vary from company to company and they vary within the same company. By providing service to employees in both group and individual settings on any financial topic, success is achieved across a broader demographic and a is revealed in improved 401k deferral rates. A sampling of individual plan deferral rate improvements is as follows:
- “50-plus Office Physician’s Group” – 13.63% improvement in plan deferral rates
- “Nationally Respected Engineering Group” – 11.96% improvement in plan deferral rates
- “Specialized Global Manufacturing Group” – 4.93% improvement in plan deferral rates
(1) Average deferral rates for the years published in the following documents:
a. “How America Saves” Vanguard Group Inc., June 2019
b. “Building Financial Futures Q1 2019”, Fidelity (FMR LLC), 2019
c. “T. Rowe Price Retirement Plan Services Reference Point”, T-Rowe Price, December 31, 2018
d. “62nd Annual Survey of Profit Sharing and 401(k) Plans”, Plan Sponsor Council of America, 2019
The increase in deferral rate for each report is calculated using the first year of published data as the “Present Value” and the last year of data as the “Future Value” and calculating the Rate of Return over the number of years of data. Wellspring cannot guarantee the accuracy of the data published by the respective data sources. Measurement results presented are for informational purposes only. Past performance is not indicative of future results.
(2) Wellspring measures changes in participant deferral rates using typically annual Census data for all employees deferring into their plan obtained directly from the Plan Sponsor to generate annual mean deferral rates for each Plan Sponsor for each year. The increase in deferral rate for each Plan Sponsor is then calculated using the first year of data as the “Present Value” and the last year of data as the “Future Value” and calculating the Rate of Return over the number of years of data. Wellspring cannot guarantee the accuracy of the data received from the Plan Sponsor. Measurement results presented are for informational purposes only. Past performance is not indicative of future results.
