Iıve been writing about 401(k) plans a lot lately, and a nagging refrain keeps playing in my head. At CFO, weıre supposed to be covering stuff thatıs of professional interest to finance executives. But as one whoıs had several employers that provided 401(k)s, I never had a sense that any of them gave a fig how well I was getting set for retirement. They rather seemed, from my shoulder-chipıs viewpoint, as if they regarded the plans as necessary evils they didnıt want to think about much, kind of like suppositories.
So, I fret, are my 401(k) articles just so much whistling in the wind?
This morning I spoke with Bill Daniels, a retirement consultant with Towers Watson, who didnıt give me much comfort. He said, ıIf Iım a shareholder, Iım not real comfortable if the company Iım invested in says, ıWe have to do social good here and make sure people have lifetime income.ı You know, employers also donıt worry that employees buy houses they canıt afford. Itıs more like, ıWe pay you. Spend it however you like.ı ı
It was an interesting observation by Daniels, considering that Towers Watson yesterday released results of a survey showing that 55% of the 9,200 responding workers would be willing to divert more of their pay to ensuring a guaranteed retirement. That compared to 46% in a survey two years ago. Other results, and the tone of the consulting firmıs report, likewise suggested that employers should listen up about their employeesı dissatisfaction with their retirement plans.
So, that should mean companies could score big wins in the areas of hiring and retention by giving employees better-than-average retirement benefits. Right? ıI donıt think so,ı said Daniels. ıEven though people often say retirement is important to them, they donıt attend to their accounts very well. Theyıre behaviorally wired that way. Itıs this long-deferred event in the future. Immediate gratification seems to be the most important thing.ı
All of that seems on the money to me. But there are other opinions, such as that of Bill McClain, the lead 401(k) consultant at Towers Watsonıs main competitor, Mercer. There is some evidence that when employees are worried about their finances, their engagement level, productivity, and loyalty to employer all decline, McClain told me. Thereıs also the issue of workforce management: People who canıt afford to retire cost the company money, because health-care expenses increase with age. Prudent succession planning might be affected as well.
Sure. I canıt plausibly argue with McClain. Most companies do offer 401(k) plans, after all. There are reasons for that. Still, employee morale and fiduciary liability aside, I donıt envision too many CFOs losing sleep over retirement matters, except their own.
Maybe itıs just that I am, and indeed an entire generation of investors is, jaded because our account returns have been flat for more than a decade. But if companies really cared about the quality of employeesı retirement, the employers would put more in the kitty. Then Iıd feel better about writing on this topic. In fact, I plan to keep writing about it in any case. Maybe if finance executives hear enough about 401(k) plans, they will learn to love them.