ENFIELD, Conn., July 14, 2015 /PRNewswire/ -- Forty-five percent of retirement plan savers are off target on saving enough to continue their lifestyles in retirement, according to an analysis of 401(k)s and other retirement plans served by MassMutual. However, the analysis also shows that many more retirement savers could become retirement ready if more employers incorporate fundamental improvements to their retirement plans such as automatic enrollment.
The data for the analysis was generated as of end-of-year 2014 by a suite of tools available through MassMutual's PlanALYTICSSM program, which is used by MassMutual to measure the relative effectiveness of retirement plans and the retirement readiness of employees who participate in those plans. After launching the program in 2013, MassMutual now has approximately two years of data on retirement plans and their participants, and is using its findings to encourage retirement plan sponsors and participants to take steps to boost retirement readiness.
"MassMutual's PlanALYTICS is a proven, powerful program that uses real data to help measure retirement readiness both at a plan level and a participant level," said Elaine Sarsynski, Executive Vice President, Retirement Services and Worksite Insurance. "We are using the data to help sponsors and participants make decisions to significantly improve retirement readiness."
MassMutual in July published a book on the retirement plan health program, "Precisely, Driving Greater Retirement Readiness through MassMutual's PlanALYTICS", reporting on the theory behind the approach, how it works and why. The book will be available to plan sponsors and financial advisors to encourage improved outcomes for retirement plans and their participants. The book is also available to the public at massmutual.com/planalytics.
Plan sponsors that participate in the program receive a detailed analysis of their retirement plan's overall health – known as the PlanSmartSM Analysis -- as well as prescriptive solutions for improvement, according to Una Morabito, Senior Vice President, Relationship Management. Plan participants also receive an analysis of their retirement readiness and, if they are off target, are provided with suggestions on how to become better prepared. The analysis is based on a benchmark of replacing at least 75 percent of pre-retirement income at 67, the age most people qualify for full Social Security benefits. The analysis can be adjusted for participants born before 1960 who qualify for full Social Security benefits at an earlier age. The benchmark takes into account retirement savings, Social Security and income from pensions, if available.
Although PlanALYTICS reports that 54.4 percent of plan participants are on target for retirement, the percentage could rise to 69.4 percent if employers incorporate plan design changes such as automatic enrollment and automatic deferral increases, and encourage savings by matching employee contributions, according to Morabito. Sponsors that incorporate those improvements typically show improved outcomes over time based on MassMutual's retirement plan data, she said.
MassMutual's data from March 31, 2013 to Dec. 31, 2014 showed that retirement savers whose employers participated in the PlanALYTICS program contributed more to their retirement plan and enjoyed bigger increases in their retirement plan savings:
- Deferrals increased 17.1 percent for participants enrolled in PlanALYTICS compared to 1.1 percent for those not enrolled in the program.
- Retirement savings increased 33.8 percent for those enrolled in the program compared to 15 percent for those not enrolled.
In addition, PlanALYTICS sponsors were more likely to feature automatic enrollment than sponsors that did not (57 percent vs. 18 percent) and were more likely to rely on automatic deferral increases (30 percent vs. 11 percent). Other improvements included incorporating target date funds and implementing focused employee communications such as direct email and mail campaigns, group seminars and one-on-one education, according to Morabito.
Among sponsors enrolled in PlanALYTICS, those that offered both automatic enrollment and automatic deferral increases reported that the percentage of income contributed by participants to their retirement plan was twice as high as sponsors that did not offer those automatic features. The average participant account balance for plans with automatic features was 61.4 percent higher than those without automatic features.
"PlanALYTICS is an important tool for plan sponsors to manage the effectiveness of their retirement plans," Morabito said. "When you combine the analytical data with prescriptive design enhancements and action steps, retirement plan sponsors and participants can realize real improvements over time. It's all about retirement readiness."
For more information about MassMutual's Retirement Services Division, please contact your financial professional or call MassMutual at 1-800-874-2502, option 4.
Founded in 1851, MassMutual is a leading mutual life insurance company that is run for the benefit of its members and participating policyowners. The company has a long history of financial strength and strong performance, and although dividends are not guaranteed, MassMutual has paid dividends to eligible participating policyowners consistently since the 1860s. With whole life insurance as its foundation, MassMutual provides products to help meet the financial needs of clients, such as life insurance, disability income insurance, long term care insurance, retirement/401(k) plan services, and annuities. In addition, the company's strong and growing network of financial professionals helps clients make good financial decisions for the long term.
MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives. MassMutual is headquartered in Springfield, Massachusetts and its major affiliates include: Babson Capital Management LLC; Baring Asset Management Limited; Cornerstone Real Estate Advisers LLC; The First Mercantile Trust Company; MassMutual International LLC; MML Investors Services, LLC, Member FINRA and SIPC; OppenheimerFunds, Inc.; and The MassMutual Trust Company, FSB.
MassMutual's Retirement Services Division has been serving retirement plans for more than 65 years. It offers a full range of products and services for corporate, union, nonprofit and governmental employers' defined benefit, defined contribution and nonqualified deferred compensation plans. It serves approximately 2.8 million participants.
For more information, visit www.massmutual.com or find MassMutual on Facebook, Twitter, LinkedIn, YouTube and Google+. For information regarding MassMutual's Retirement Services Division, you may also visit massmutual.com/retire or find us on Facebook.com/RetireSmart and YouTube.com/RetireSmart.
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