Most workers who stayed in their defined contribution retirement plans have finally recouped their losses from the 2008 market slide, but participation is down across the board, Vanguard says.
The downturn in enrollment, contributions, and total savings rates since 2007 isn't big -- maybe a percentage point or two out of all the people eligible to participate -- but it's still a significant reversal of the 2004-2007 trend.
In fact, weighted by plan, participation is back down at 74% of the eligible worker pool, which is where it plateaued from 2002 to 2004.
Hard to tell whether that represents a return to the somewhat skittish sentiment that followed the bear market that ended in 2002. If so, we should start to see enrollment start edging back up this year or next year.
Interestingly, even in plans with nominally automatic enrollment, younger and less well-paid workers are still opting out.
Only 75% to 76% of those earning under $30,000 or holding under two years of tenure with their employer are contributing to their 401(k), which means a full 1/4 of these workers are actively deciding not to participate.
Granted, that's a lot better than the grim 74% of the low-salary population who are consciously signing up for voluntary 401(k) accounts, but it's still a lot lower than the universal enrollment that backers of the automated system were hoping to see.
In fact, the number of employers working with Vanguard who switched to an automatic set-up edged up just 3 percentage points to 24% last year.
As Vanguard says, "it remains to be seen whether the slowdown in plan sponsor adoption of automatic enrollment is due to the current economic conditions or if adoption of the feature has reached a plateau."
One widely reported stat: target-date funds are still booming, with a full 20% of the 401(k) market now relying on these vehicles to streamline their retirement saving activity.
That may or may not be good news, depending on how you feel about these portfolios. Advisor-managed accounts hit a wall, with only 3% of the market.
And even though more than half of all Vanguard plans now offer financial planning to participants aged 55 and up, only 3% of that population is taking advantage of the service.
The advice and the tax incentives are out there -- and so is the need for Americans to save more effectively. What will it take to get them to take advantage of all the tools at their disposal? And how can advisors help?