Speaker 1: These sees Bloomberg Business Week with Carol Messer and Tim
Speaker 1: Stenevic on Bloomberg Radio. All right, so we've been talking
Speaker 1: a lot. You and I talked about this just earlier,
Speaker 1: the average four O one K account. This was from
Speaker 1: Fidelity Law losing about a fifth of its value in
Speaker 1: twenty twenty two. We know that we know what happened
Speaker 1: with the stock market, certainly in twenty twenty two, we
Speaker 1: talked about it never ending. We had that mly Pulse
Speaker 1: survey this week Global Investors right saying that if you
Speaker 1: want to retire comfortably, you're going to need between three
Speaker 1: and five million dollars. We have a great guest to
Speaker 1: talk about a lot when it comes to retirement, Where
Speaker 1: to put your money. Yes, we are very lucky to
Speaker 1: be joined in our Bloomberg Interactive Broker studio. Sorry, guys ahead,
Speaker 1: trouble getting my words out there with David Musto. He's
Speaker 1: president and CEO of a Census, an independent record keeping
Speaker 1: services company and third party administrator of retirement plans, among
Speaker 1: other things. And David is joining us now. David, thank
Speaker 1: you so much for coming in to talk with us
Speaker 1: about probably like the most important decision we all may
Speaker 1: get how much money to say, agreed and thrilled to
Speaker 1: be here. Tell us what's top of mind for you
Speaker 1: right now. Well, you know you talked about people's accounts
Speaker 1: being down, and that's true. But really the important takeaway
Speaker 1: is we need to be consistently saving over time and
Speaker 1: increasing our saving over time to really set ourselves up
Speaker 1: for a successful retirement. One of the things that's been
Speaker 1: great to see is that there's been a lot of
Speaker 1: consistency and resiliency in the American saver So despite all
Speaker 1: of the headwinds, despite everything that's going on in the environment,
Speaker 1: so even through the pandemic, is even through the pandemic,
Speaker 1: the average contribution to four one K plans has remained stable.
Speaker 1: We haven't seen very high numbers of people taking loans,
Speaker 1: we haven't seen significant increases in the people taking hardship
Speaker 1: with royals. There's been some slight increases, but on the
Speaker 1: margin you're talking about one to two percent of participants
Speaker 1: and plans is it's because a lot of people who
Speaker 1: have for one K plans through their work, a lot
Speaker 1: of those people stayed employed, a lot of those people
Speaker 1: stayed employed, and we've been well trained. Think about the
Speaker 1: last couple of decades right dot com bubble burst, two
Speaker 1: thousand and eight, two thousand and nine, financial crisis, people
Speaker 1: have been learning that staying put right, being consistent, continuing
Speaker 1: to save over time is the best way to see
Speaker 1: through those difficult periods. So it's really good news. Now,
Speaker 1: the bad news is we have twenty five percent of
Speaker 1: Americans that don't have any retirement savings. Right, about forty
Speaker 1: percent that would say they're not on track to a
Speaker 1: successful retirement. And guess what, that number is probably low.
Speaker 1: There's probably more people that truly aren't on track. It's
Speaker 1: fifty five million Americans that don't have access to our
Speaker 1: workplace retirement program. Well, this was going to be my
Speaker 1: question for you about pandemic saving. You mentioned those of
Speaker 1: us who were lucky enough to keep working and saving,
Speaker 1: But I wonder if you have any insight into the
Speaker 1: data about those people who were like really struggling through
Speaker 1: the pandemic. Did they cut back on their for one
Speaker 1: case savings or were those folks already not saving? Yeah,
Speaker 1: we've seen the people that are on track and saving continue, Yeah, right,
Speaker 1: buying large. We have seen people saving for other purposes
Speaker 1: outside of retirement, beginning to decline somewhat. So five twenty
Speaker 1: nine education savings programs where you can put aside money
Speaker 1: on a tax advantage basis for your kids education, We've
Speaker 1: seen a slight downtick in the contributions that are going
Speaker 1: into those plans. Many Americans are saying, well, if I
Speaker 1: have a choice of putting money to my long term
Speaker 1: retirement or doing tax advantage savings for my kids education,
Speaker 1: I'm probably going to stick with the retirement and self
Speaker 1: fund the education. Is it a choice or is it
Speaker 1: a case of demographics or Well, for right, like, does
Speaker 1: everyone know about savings? Well, so a great question. Forty
Speaker 1: percent of the people that should know about tax advantage
Speaker 1: savings for education don't. I've never heard of five twenty
Speaker 1: nine programs, so big upside opportunity for take advantage of.
Speaker 1: Now there's Americans that have the discretionary income to be
Speaker 1: able to maximize their for when K plan, maximize their
Speaker 1: five twenty nine education, maximize their health savings account, which
Speaker 1: is going to be increasingly important for people as healthcare
Speaker 1: healthcare costs increase in retirement. There's a lot of other
Speaker 1: people that do need to make a choice. I was
Speaker 1: just going to say to be fair. We talk so
Speaker 1: much about our economy that it is really built on
Speaker 1: the backbone of a lot of small businesses, which I
Speaker 1: don't necessarily assume. I mean in small businesses can be
Speaker 1: a handful of people to more than a handful of people.
Speaker 1: It's quite a range. But I do wonder in the
Speaker 1: small business community, do you increasingly see that they're being
Speaker 1: offered up for a one ks to their employees, because
Speaker 1: I do feel like as a result of that, a
Speaker 1: lot of people get left out. Yeah, that's because how
Speaker 1: do they do it? You're a spot on. That's where
Speaker 1: the challenge has been the fifty five million plus Americans
Speaker 1: that don't have access to a workplace plan or probably
Speaker 1: working for a small company. Companies with fewer than fifty
Speaker 1: employees or so, probably only fifty percent of them or
Speaker 1: fewer offer a four oh one K program or some
Speaker 1: other define contribution program. So there's a lot happening right
Speaker 1: now to try and create a better environment for small
Speaker 1: companies to start programs. You just saw the Secure two
Speaker 1: dot O Act, which was passed by Congress in December
Speaker 1: of last year, which created tax incentives for business owners
Speaker 1: to start plans. They can actually get a credit for
Speaker 1: the full set up cost of a new four oh
Speaker 1: one K plan and also get credits up against matching
Speaker 1: contributions for employees. That's a big deal. That's interesting because
Speaker 1: I think the cost is the match right, That is
Speaker 1: a component. There's also startup costs though, are getting a
Speaker 1: plan off the ground to listen in the total scheme
Speaker 1: of things, No, it could be a couple of thousand
Speaker 1: dollars four thousand dollars, you know, on an annual basis
Speaker 1: for a very small company to be able to offer
Speaker 1: a program, and they could do it considerably less expensively
Speaker 1: as well. There's also in the small business community because
Speaker 1: of the focus on building that business and making sure
Speaker 1: that it's successful, less of an understanding of some of
Speaker 1: these these opportunities, and the environment has become a lot
Speaker 1: better to start up a program. I'm assuming a tight
Speaker 1: labor market has something to do where companies have to
Speaker 1: think about what they're offering up about you'd better believe
Speaker 1: it right. So now the competition for talent, we see
Speaker 1: this when we talk to our clients. They say, the
Speaker 1: first question I'm getting asked, or one of the first
Speaker 1: questions from perspective employees is tell me about your benefits.
Speaker 1: Tell me about your four O one K plan. How
Speaker 1: big is your match? Yeah? Have you done that as
Speaker 1: you've popped around to different companies? Yeah, I mean before
Speaker 1: you came to us and then they were like, whoa, well, yeah,
Speaker 1: I came here my forever home of course. But before that,
Speaker 1: you know, I was working in media and I've worked
Speaker 1: at places where there they think it's hilarious that someone
Speaker 1: would ask for a match, you know what I mean.
Speaker 1: But it's really hard because how to stay at a
Speaker 1: company then is as employees, you know, start to grow up,
Speaker 1: We're like, you're forcing me to quit, you know. So
Speaker 1: it's it's such a critical thing, the retention aspect. I
Speaker 1: would imagine they save on retaining talent. Yeah, for sure.
Speaker 1: People are saying that significantly. And you know, another point
Speaker 1: here is particularly for younger workers, people entering or starting
Speaker 1: their careers, get on the right path to saving inertia
Speaker 1: is a powerful thing and it's and it's a very
Speaker 1: negative thing if the inertia is in the wrong direction.
Speaker 1: So a big thing right now in our market is
Speaker 1: auto features and plans. When someone joins a company, they're
Speaker 1: automatically enrolled in the four oh one K plan, and
Speaker 1: their contributions are automatically escalated each year, and the individual
Speaker 1: can say, hey, listen, I want to stop. But once
Speaker 1: people are exactly and once people are on that path,
Speaker 1: eighty percent of the people stay on the path. This
Speaker 1: is something that my friends and I have talked about
Speaker 1: a lot. With inflation being what it is, and especially
Speaker 1: in New York City, with apartment rents being what they are,
Speaker 1: a lot of my friends said, I have to decrease
Speaker 1: my four oh one K contribution to be able to
Speaker 1: afford my groceries right now. Are you seeing that, particularly
Speaker 1: in the millennial age group like twenty to thirty is decreasing. Yeah,
Speaker 1: we see, Um, we see that younger cohortum challenge with
Speaker 1: that kind of a decision. Yeah right, um. And our
Speaker 1: advice right is to yes, you need to provide for food, clothing,
Speaker 1: and shelter, but if you're going to make sacrifices and compromises,
Speaker 1: that's probably the place to do it, not starting the
Speaker 1: proper path to long term savings, because it's gonna have
Speaker 1: a tremendous impact on your life and on the financial
Speaker 1: security of your family longer term. It is amazing. My
Speaker 1: mom was like, pay yourself first. But there is something
Speaker 1: about teaching kids so they start early because if you
Speaker 1: really start early, over time, it's amazing how it grows
Speaker 1: and it makes it easier. The discipline is important. We
Speaker 1: have a app, as many companies do, and when we
Speaker 1: have a participant in a four when K program go
Speaker 1: in to decrease a contribution rate, we will show them
Speaker 1: a projection of what that extra couple of hundred bucks
Speaker 1: means in terms of income. Right when when you're fifty
Speaker 1: five or sixty and guess what, thirty percent of the
Speaker 1: people who thought they were going to reduce their contribution
Speaker 1: don't do it. It's very motivating to see what a
Speaker 1: bad decision it is. Right, it's amazing you play around
Speaker 1: the numbers. Ours does the same thing and you're like,
Speaker 1: oh okay, so really part important. This is such an important,
Speaker 1: you know topic because I feel like we've been talking
Speaker 1: about financial literacy for such a long time, but it
Speaker 1: is really important in terms of, you know, a person's
Speaker 1: financial future, especially when you don't have companies offering a
Speaker 1: pensions anymore. You bet, And that's why workplace programs are
Speaker 1: so important because I hate to say it, education doesn't
Speaker 1: work all right, David, we gotta run, come back soon.
Speaker 1: David Musto, President CEO of a Census, joining us in
Speaker 1: studio