The Retirement Savings Temperature It's More Than the Current Plan

Much attention is paid to how well DC plan participants are doing. Most reports are based on the participant’s balance in their current plan. This measure is too narrow. Most people have less than 10 years of service with their present employer.  According to PSCA’s 54th Annual Survey, the average retiring participant has worked approximately 16 years with their final employer. Most workers spend their other 24 years of employment with six employers where they have relatively short tenure. In our emerging DC world, when people retire they have retirement savings in addition to what accumulated in their current employer’s plan. This was demonstrated by a recent study by Fidelity Investments. Fidelity found that individuals 65-69 with only a 401(k) with Fidelity had an average of $123,400. Those 65-69 who had both 401(k) and IRA account balances with Fidelity had average total retirement savings of $359,000. Why the difference? The first group is likely those for whom Fidelity Investments is administering only the 401(k) savings accumulated with their final employer. The second group has aggregated their retirement savings from all sources with Fidelity Investments.

If you want to know how workers are doing you have to go beyond the balance in their current plan. By the way, it’s interesting that $123,400 is approximately what a typical 401(k) participant retiring today could have accumulated over the previous 16 year period.