Beyond the 401k: Reinventing Retirement Savings
Traditional retirement savings plans are failing the modern workforce.
Today there are 55 million working Americans (over half the workforce) that don’t have a workplace retirement plan. Because saving for retirement hinges on your employer, and millions are without access to a workplace savings plan, it’s time to reinvent how Americans save for their futures.
Features have become flaws.
The world has dramatically changed since the 401k was created a half century ago, leaving traditional retirement plans behind and unable to support how we live and work today. These plans are built for people who work for the same employer most of their career, take a one-size-fits-all approach to investing, and have outdated eligibility rules. As if this weren’t enough, the industry is largely running on outdated technology platforms that keep costs high and make it hard for employers and retirement savers to use these plans.
The challenges for employers typically include: A six to eight week set up period, burdensome regulatory and fiduciary requirements, complex legal and compliance reviews, and ongoing plan management.
The challenges for retirement savers typically include: Limits on who’s eligible to participate, high fees, and lack of portability. Lack of plan portability is a big problem because it forces workers to change plans, every time they change jobs. This comes at a high cost, either as an expensive rollover or cashing out a plan. It’s estimated that $92 billion in retirement savings is lost annually due to 401k plan cash outs.
The COVID pandemic has exposed the impact of this failure.
The COVID crisis spotlights the structural flaws in a retirement savings system that cannot accommodate the fastest growing sector of the workforce: independent contractors, self-employed, and gig workers. The modern mobile workforce doesn’t fit into the traditional definition of employee, and therefore doesn’t qualify for using a company sponsored 401k plan.
The economic conditions of COVID, combined with the failures of the current system, have expanded the retirement savings gap by 4.5% to a staggering $3.68 trillion retirement savings deficit. The Employee Benefit Research Institute (EBRI) estimated that 40% of small businesses will terminate their 401k plans due to high costs and between 30–50% of employers will discontinue matching contributions. Recently, the Center for Retirement Research started compiling a list of corporations that have suspended or eliminated their matching contributions.
Retirement savings is one of the most efficient and powerful tools we have to address economic inequality. People with a plan have financial security today, and in the future.
Icon Savings Plan: A portable retirement plan built for today’s workforce.
Icon delivers a personalized, portable retirement plan for retirement savers and offers employers a radically simple way to provide a 401k-style retirement plan to all of their workers.
It works like a 401k with pre-tax payroll contributions, but removes the cost, plan administration, fiduciary responsibility, and regulatory burden from employers. For retirement savers, Icon offers something completely new in workplace savings, a portable plan that stays with them for life. Icon’s portability removes the need for rollovers, eliminates lapses in coverage, and takes the guesswork out of investing.
People saving through Icon are invested in low cost portfolios that are tailored to their needs. Through targeted messaging and financial wellness, Icon’s platform is a more personalized approach to financial wellbeing. In addition, Icon’s transparent flat monthly fee structure isn’t tied to assets under management, which means workers keep more of their nest egg instead of paying high fees. These features align with what today’s consumers expect.
Icon’s technology platform reinvents what’s possible in workplace retirement savings and solves some of the biggest industry challenges: lack of plan access, intermittent coverage, and cash outs that result from lack of portability.
These types of structural changes are required to help ensure that all working Americans have access to workplace retirement savings.
Icon. A retirement plan for everyone.
For more information on Icon, visit us.
