How the Profession Can Impact Retirement Planning

A major part of our mission at The American College of Financial Services is to use the financial knowledge we provide to benefit society: whether it be through direct means, such as our consumer financial education programs like Know Yourself, Grow Your Wealth®; or indirectly through the foundational and specialized education advisors get with designations designed to empower them to serve clients better. I and everyone at The College take that charge seriously; but to truly translate ideals into action, we must continue to be aware of the very real headwinds many Americans face when it comes to their finances.

I was reminded of this while viewing a recent episode of our Shares podcast, in which our Professor of Wealth Management and Wealth Management Certified Professional® (WMCP®) Program Director Michael Finke, PhD, CFP®, spoke with veteran retirement planning expert Ted Benna. Ted is an alum of The College and known by many as the “Father of the 401(k)”: it was his inspired reading of tax laws that allowed the 401(k), and indeed modern retirement planning as we know it, to be born. And, as it happens, the date of that anniversary is coming soon: the IRS guidelines that allowed pre-tax salary deductions and led to the 401(k)’s creation were issued on November 10, 1981! You can see more of that conversation on our YouTube channel.

In the discussion, Ted lays out the fascinating history of the 401(k), as well as all the good it has done in democratizing retirement savings and how it has made such savings a bedrock tenant of many employee benefit plans in companies across America. However, he also acknowledges that as times have changed, so have the uses of the 401(k) accounts he created, and they have evolved into a form far beyond their original and intended purpose; a great benefit to many employees with high salaries, but one that an increasing number of those living paycheck to paycheck do not feel they can afford to take advantage of. Research by Vanguard and others indicates those in higher income brackets consistently retire with greater 401(k) balances; additionally, when looking at all U.S. private-sector workers, only about half are contributing to a retirement plan of any kind, challenging the idea that they can ever afford to stop working.

If you spend any time watching the news, you also are probably aware of growing concerns across America regarding affordability in groceries, housing, fuel, and so many other necessities of daily life. Paradoxically, this consumer pessimism seems to fly in the face of the insistence of many in finance that the economy is, in fact, booming, and that rising wages still outpace inflation. I see these two stories as indicators of the same underlying issue: a disconnect between financial services as an industry and the people we serve.

Citing statistics and insisting our clients are wrong to be worried will not assuage their concerns or help them make better financial decisions. They need our empathy, understanding, and open-mindedness to talk about their fears as well as their hopes. In his discussion with Michael, Ted mentions a new retirement planning product he is working on that is meant to fill in the gaps of modern 401(k)s by giving lower-income workers penalty-free access to their savings and greater incentives for employer contribution; I’ll leave it to the experts on our faculty and elsewhere to debate the merits of such an idea. But the point is that the time for new ideas is now. Just as I’ve spoken before about the profession’s need to adapt to the desires of the up-and-coming Gen Z workforce, so too must we continue to innovate new ways to ensure the wellbeing of our clients and consumers come first.

To ensure our chosen profession keeps delivering benefits society and all the wonderful and diverse communities that make it up, we must remain open to new possibilities and embrace the potential of transformative change. With that mindset, I know we will continue to move forward together. 

More From The College

• Meet the “Father of the 401(k)” on Shares