Overcoming Savings Adverse Behaviors in 401K Plans

Confero Winter 2016

Michelle Capezza, a Member of the Firm in the Employee Benefits and Health Care and Life Sciences practices, in the firm’s New York office, authored an article for Confero titled “Overcoming Savings Adverse Behaviors in 401k Plans.”

Following is an excerpt:

For many reasons, including funding challenges, and increasing costs, most, if not all, American workers entering the workforce today will not be able to secure their retirement savings from an employer-sponsored, professionally managed pension plan. As many plan sponsors continue to de-risk or terminate their pension plans and opt solely for defined contribution plan-type offerings, such as 401(k) plans, employees must make decisions concerning plan participation, investments and savings rates for their own plan accounts in order to prepare for their own retirements. Problematically, studies in behavioral finance have shown that it is not always easy for employees to make such decisions and, too many plan choices can paralyze plan participants. Employees may procrastinate regarding enrollment in the plan, fail to appreciate the long-term need for savings versus the short-term need for income, or not understand how to select investment options.