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10 things

Feb. 23, 2013, 7:01 a.m. EST

10 things 401(k) plans won’t tell you

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By Elizabeth O'Brien

Continued from page 3

4. The system isn’t working for employees — or employers.

The aggregate retirement income deficit for all Baby Boomers and Gen Xers — that is, the amount by which their savings, plus Social Security, fall short of what they’ll need — is $4.3 trillion, according to the Employee Benefit Research Institute. Clearly, folks aren’t setting aside enough for their post-work lives. The average employee contributes 6.4% of her paycheck to her 401(k),according to the Plan Sponsor Council of America. Advisers recommend 10% as a baseline minimum, and for those who start late (in their 40s or even 50s), 15%.

The problem’s not just one for workers, though. Post–financial crisis, companies have noticed a rise in so-called “hidden pensioners,” Credico says. These are individuals who can’t afford to retire, but they check out on the job. Plenty of older folks enjoy the stimulation of work, but hidden pensioners punch the clock for a paycheck alone, and their performance suffers for it. The good news is that these laggards are spurring companies to design more effective retirement plans, Credico says — a self-serving motivation, for sure, but at least it’s ultimately to participants’ benefit.

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