Critics, politicians, and many in academia have been highly critical regarding the effectiveness of the qualified retirement plan industry in the United States. To be sure, it is not a perfect system, and there remain significant numbers of American workers that do not have access to a company sponsored retirement plan. Many more are not saving enough and not investing their retirement plan assets wisely, which reduces financial capabilities in retirement years. But with nearly 39 trillion dollars (for effect, that is $39,000,000,000,000) amassed in these qualified investment accounts, the American retirement plan system can hardly be called a failure.

According to the Congressional Research Service, approximately two-thirds of US households had a financial stake in the U.S. retirement system. Nearly a quarter of those households boast more than $100,000 in these accounts, showing the system is working for a significant percentage of Americans. Adding these growing retirement plan assets with Social Security benefits easily demonstrates that replacement income during retirement has been continually improving over the recent decades.

Still, tens of millions of workers are not currently being covered by private retirement plans, so there is work to do in improving access. Many of these uncovered workers are younger and are at an opportune time to begin the healthy habit of incremental saving and wise investing over a long time horizon. The recently proposed Federal Auto IRA bill highlights yet another effort to extend coverage to many of these uncovered folks. Additionally, there has been a renewed push for more financial professionals to get involved in the retirement plan industry to support the recent explosion of defined contributions plans. This trend that is only expected to accelerate, due to government mandates and tax credits through the recent SECURE 2.0 Act.

As new employees enter the 401(k) marketplace, the enrollment tools have become simpler, removing some friction triggered by misguided advice and bogus insights pedaled through social media platforms ubiquitously accessed through most smart phones today. Not surprisingly, people born after 1997 (Generation Z) appear particularly susceptible to reliance on social media for investment insights. A recent survey by WallStreetZen found that 75% of Gen Z respondents admitted to using TikTok, YouTube, and Reddit for their primary financial education. Although those channels can offer accurate and valuable information, it is hard to separate the wheat from the chaff, leaving too many of these young people vulnerable to misinformation and overthought. Fortunately, plan design enhancements to counteract these tendencies, such as automatic enrollment defaults, have been steadily rising in popularity and raising the saving rates of many employees. Nearly 60% of all defined contribution plans now default new employees into a retirement savings rate to easily put them on the track to long term success.

There remain legitimate concerns that too many Americans have yet to engage the current retirement plan system. Perhaps a wiser gauge of success is to observe the incredible growth of participants and assets within these qualified investment accounts over the recent decades. Despite the inherent challenges of creating a system that works for all population groups, the retirement plan industry has made amazing strides to improve the retirement outlook for the majority of Americans. The retirement plan industry and prevailing wisdom of large portions of the US working population have led to decades of consistent savings, which is increasing their chances of retiring with dignity. The Greenleaf Trust Retirement Plan division remains proud to participate with our corporate clients to ensure we are doing our part by helping tens of thousands of employees be more and more prepared for retirement!