Surprise! 401(k)s rode out the Great Recession just fine

The Annual Transamerica Retirement Survey was recently released. It offers an enlightening look at retirement plan trends from both the employer and employee perspective and provides recommendations for improvements to plan sponsors, participants and policymakers. It's consistent and comprehensive.

The latest survey — its 13th annual report — looks at how 401(k) plans have fared over the past five years during the Great Recession.

Despite economic difficulties, access to retirement savings plans increased over the past five years. The percentage of employers offering 401(k) plans rose from 72% in 2007 to 82% in 2012. During the same five-year period, the number of companies offering traditional defined-benefit pension plans decreased from 19% in 2007 to 16% in 2012.

Although the percentage of employers offering matching contributions decreased from 80% in 2007 to 70% this year, half of those who decreased or suspended their match since 2008 have already reinstated it.

Automatic 401(k) features such as automatic enrollment and automatic escalation are on the rise. The percentage of large companies, defined as those with 500 or more employees, offering automatic features increased from 31% in 2007 to 45% in 2012. And a whopping 84% of them have adopted a Qualified Default Investment Alternative solution, such as a target-date fund or managed account, for employees who fail to make their own investment selections.

The percentage of employers adding a Roth feature to their plan increased from 19% in 2007 to 32% in 2012.

Meanwhile, American workers continued to save for retirement during hard times. Participation rates remained strong and steady at 77% and in 2012, the median annual salary deferral rate returned to the 2007 level of 7%, after dipping to 6% during 2009, 2010, and 2011

Unfortunately, the recession affected retirement savings in other ways as some workers, particularly those who became unemployed or underemployed, had to take loans or hardship withdrawals from their accounts.

Despite the impressive savings gains, current account balances are inadequate for many workers to meet their future retirement income needs. Consequently, the majority of workers—56%--plan to work past age 65, including 43% who plan to work past age 70 or who do not plan to retire.

Source:  Mary Beth Franklin, Investment News

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

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