What are the main characteristics of the retirement market in the US?

December 21, 2012

Aegon experts from across the company explain the challenges faced by their nations, and how we can work to Transform Tomorrow around the globe.

Getting more people saving is a massive issue. Today little more than half of the 140 million Americans who work are covered by any type of retirement plan. This problem mostly stems from smaller employers who do not want to offer a plan because of cost, complexity and fiduciary liability. But even where 401k plans are offered, only 78% of eligible employees actually participate as these plans are voluntary.

Man and woman on boat

The other big issue in the United States is the need to reverse a widespread lack of planning by individuals for their retirement, an issue often described as 'retirement readiness'. We have 77 million baby boomers retiring over the next 18 years. To put this in perspective, 11,200 Americans retire every day, yet the average amount held in a defined contribution 401k account is just $61,000, so this lack of retirement readiness is a very real problem. Younger workers are waiting until later to save, or if they do start early, are frequently not saving enough. And many Americans, of all ages, have simply picked a savings level and stuck with it, without ever having built a genuine retirement plan or strategy.

In your opinion, what are the solutions to these challenges?

Making it less costly and complex for small businesses to feel comfortable sponsoring a retirement plan would increase coverage of retirement saving among individuals working for smaller employers.

The savings industry can also get more people saving by promoting automatic enrollment of employees into plans. More also needs to be done to promote automatic escalation of contributions, where employees pledge to increase contributions incrementally each year. Many larger companies already do this, but again this strategy is less common among smaller employers. And finally, it is essential that our industry do more to help people better understand the real need to save a larger percentage of their compensation to help ensure they are fully prepared to retire with confidence. Many initiatives are being vetted right now on a legislative and regulatory front to help us achieve these goals.

How can Aegon best help with these solutions in the US?

As a provider servicing 21,000 employers we can make a real contribution towards the nation's retirement readiness by educating companies about automatic enrollment and automatic escalation of contributions. Transamerica Retirement Solutions and Diversified, our two retirement brands in the United States, energetically promote both solutions. We are also working hard to raise the level of understanding among the 3 million people whose assets we manage, about the retirement challenges they will face. We have 191 enrollers who travel through the country speaking to employees about how much they will need to retire comfortably and how much they can expect to spend on health care costs. We have also developed innovative and user-friendly tools to help employees take control of their financial future. For example, our online RetireTrack tool allows individuals to periodically evaluate whether they are doing the right things to achieve their retirement plan.