Data and Research March 16, 2016

Plan Sponsors and Participants Will Pay A Little Less in 2016

Average all-in plan fees are down for both small and large retirement plan sponsors, according to the latest edition of the 401k Averages Book.

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The average total plan cost for a small retirement plan with 100 participants and at least $5 million in assets declined from 1.29% to 1.28% over the past year, according to the 16th edition of the 401k Averages Book.

Published since 1995, the 401k Averages Book strives to be an affordable-but-useful information tool to help retirement plan industry providers and clients do effective benchmarking and make comparative plan design decisions.

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The 2016 update shows the average total plan cost for large retirement plans—with at least 1,000 participants and $5 million assets—declined even more than for small plans, from 1.03% to 0.97%.

“On average 401k investment fees continue to decline in both the small and large plan market,” explains David Huntley, co-author of the 401k Averages Book, calling the findings very encouraging. “401(k) fees have been trending down for years [since 2010] and plan participants have benefited because of it. The research shows how the average total plan cost for a 100 participant plan has decreased from 1.33% in 2010 to 1.28% in 2015.”

Stripping out administration and other costs, researchers find the average investment cost for a small retirement plan declined from 1.22% to 1.21% over the past year, while the average investment cost for a large retirement plan declined from 1.01% to 0.95%. Also important to note, even amid the serious year-over-year fee compression, there “continues to be an uptick in 401(k) lawsuits, and some have targeted revenue sharing as well as other fiduciary issues.”

Joseph Valletta, the other co-author of the 401k Averages Book, explains revenue sharing itself is not a harmful or illegal practice, but “when a sponsor does not know how much revenue sharing is generated, how it’s used or how it compares with industry peers, that might cause issues.” He observes that small plans currently generates 0.66% of revenue sharing, while a large plan generates 0.40%.

The 16th edition of the 401k Averages Book is available for $95 and can be purchased by calling (888) 401-3089 or online at www.401ksource.com. 

Data and Research March 16, 2016

Women’s Biggest Retirement Concern: Long-Term Care

Despite their fears, few women have talked to loved ones or a financial adviser about long-term care plans and costs.
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The majority of women 50 and older in America keep their biggest retirement concern to themselves—the fear of becoming a health care or long-term care responsibility to their families, according to a Nationwide Retirement Institute survey.

The survey of 709 women and 582 men ages 50 or older finds two-thirds of women (66%) are worried they will become a burden to their family as they get older (compared to 50% of men). In addition, 78% of women say they are concerned about having money to cover long-term care (LTC) expenses.

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Despite these concerns, six in 10 women ages 50 or older (62%) haven’t talked to anyone about long-term care costs. Of women with a spouse or women with at least one child, the most common reason they aren’t talking with these loved ones about health care costs in retirement is they don’t want them to worry (43% and 62%, respectively).

However, Nationwide says not talking about long-term care now can do more harm than good to women’s families later. “Families need to be aware of what they will face if they do not plan ahead for this risk—both emotionally and financially,” says Shawn Britt, director of long-term care initiatives, advance consulting group at Nationwide.

NEXT: LTC concerns

Among women in the study, 67% say they would rather die than live in a nursing home. Seventy-three percent prefer to get LTC in their own home, but only 51% think they will.

Nealry two-thirds (64%) say they are "terrified" of what health care costs may do to their retirement plans, and 47% are willing to give all their money to their children so they could be eligible for Medicaid-funded LTC.

Nationwide notes that the average life expectancy for women is 86, with one in four reaching age 92. Longevity increases the chance of needing LTC services during their golden years. That's why it's especially important for women to include planning for LTC costs in retirement.

Despite few women 50 or older (9%) having discussed LTC costs with a financial adviser, 57% of those who have discussed retirement with a financial adviser plan to discuss LTC costs with them.

"The good news is more than half of these women say they plan to have these discussions," says Roberta Eckert, vice president of the Nationwide Retirement Institute. "Financial advisers can play a major role in helping women plan for and live in retirement by providing a fact-based estimate of their long-term care costs and setting up plan to pay for those costs."

To simplify this complicated issue and encourage discussions around health care costs in retirement, Nationwide offers a Personalized Health Care Assessment, and women can also visit www.nationwide.com/womenandinvesting for additional retirement planning resources.

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