The Secret to Being in The 401(k) Top 0.2%

  

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SmartMoney.com recently reported that only 0.2% of 401(k) participants have more than $1 million in their 401(k)’s. More concerning, the article also reported that only about 2% of those participants above age 55 are estimated to have more than $1 million in their 401(k)’s. With a median balance in the 401(k) at around $60,000, there is concern that the traditional 401(k) design is not helping participants meet their retirement income goals.

SmartMoney.com goes on to address some of the reasons that the traditional 401(k) plans are not succeeding:

• Plans are “overly complex, with too many options, too high fees, and too many ways to cash out one’s next egg.”

• Most participants “do not have the knowledge or the discipline to [invest their 401(k) plan] themselves.”

• Charles Schwab found that educating participants on how to invest their 401(k) has not been successful – approximately 90% do not take advantage of education. That means the millions of dollars spent (and usually paid for out of participant 401(k) assets) on traditional 401(k) education does not help 9 out 10 participants.

The article concludes with the “secret” to getting to the 0.2%: “constant participation and high contribution rates.”  

Our Take

As with many things, it is doing the right thing over long periods of time that leads to success. Additionally, traditional participant behavior drivers such as education have proven to be expensive and ineffective. In fact, a very cost-effective 401(k) solution is now available to help get participants to a target replacement income with no participant effort. To us, the most effective 401(k) plan is the one that requires the participant to do absolutely nothing in order to reach their retirement goal.   

Our ONE Retirement Plan Program is a new 401(k) program re-designed from the ground up for the 99.8% of people that are not yet 401(k) millionaires, but want to greatly improve the odds of becoming one.