E*TRADE hosted a "Retirement Education Day" last week. April 9 is the start of National Retirement Planning Week. What both of these Hallmark holidays have in common is retirement education, which is probably one of the toughest initiatives a retirement advisor can get behind: it's a lot of work and everyone's just there for the free donuts.
But let's assume for the moment that education is the key to participation. The more people who participate in a plan, the more money ends up in the plan… so more money that ends up in your pocket… so you can spend Retirement Planning Week in a bathing rather than business suit.
But where can education provide the biggest oomph?
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I took a look at every 401(k) plan in the country and compared plan size against participation rate. For the purposes of this investigation, participation rate was based on the number of participants versus those who had account balances (i.e. those who had a plan and actually put money into it).
Here are the top four trends my study revealed about 401(k) participation as it relates to plan size. [click image for bigger size]
Micro Plans Does Not Mean Micro Participation
The smallest plans (those with fewer than 10 participants) had participation rates well above 90 percent. These are likely tiny practices where the staff is close and everyone gets in on the action.
Small Plans Have the Smallest Participation Rates
Once you get over the 10 participant limit, participation falls off sharply. These are companies that aren't necessarily as close knit as the micros, don't have the capital to offer huge match rates, and aren't at the top of the list for advisors to provide key investment and retirement advice to. There's quite a growth opportunity here!
Big Companies Boast Big Participation Rates
Companies with between 1,000 to 10,000 participants had the best participation rates outside of the micro market. These are large businesses that have the ability to offer juicier matches and retirement education programs.
Really Big Companies Have a Lot to Learn
These are the conglomerates like McDonald's and Exxon who have huge retail and minimum wage workforces. They offer good benefits, but so many of their employees simply don't have the extra pocket change to save for retirement. All of the education in the world can't make all of Wal-Mart's 1.2 million invest in their 401(k)s.
As always, please feel free to email me at [email protected] if you have any questions about my conclusions or methodology.
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