For several years there is something new, offered to the companies to use it for their employees in order to help people with their retirement savings. This does not mean that now people are better prepared for their retirement years and the situation from 2006, when it was introduced, has not changed so dramatically.

What is a 401 (k) plan – this is a plan for “auto-enrolling” employees by the companies they are working for at the moment, which is according the provisions of PPA (Pension Protection Act, 2006). It is applied by the company unless the employee actively declines. The goal was to help the people with preparing for retirement and that auto –enrolment worked, for example 82% of the employees have agreed to participate in a 401 (k) plan, which is quite better than 56 % of the employees from companies which do not use the program. After that legislation passed, now the number of companies using that feature has doubled and is almost 60%.

According to the research data from EBRI (Employee Benefit Research Institute) the situation with people saving for retirement years is really bad. The average amount is $110,000 but there are people with less then $25,000. Part of the main problem with auto-enrolling comes from the companies. Only around 20% of them automatically enroll all existing employees, but most of them enlist only new workers and forget to add their main, already existing workers.

Another side of the problem, according to some experts is the investment funds which are selected for the workers, who are passive investors in this case. About 90% of these plans are put in target-date funds. That means that these funds are designed to give profit at the time when the employees are supposed to retire. But here comes the problem – these finds still remain “controversial”, and that means that with the years investors can even lose money, and that is a risk for which most of the investors are not prepared for. At the economic crash at 2008, many of these funds were criticized because of the double-digits loses.

That is why fund companies have decided to defend the portfolios that concern savers planning, especially if they refer to retirement after 20-30 years. And the Department of Labor excluded lower-risks and lower-return investments from the list of acceptable default options and instead begun to favour funds with stock market exposure.

Financial advisors recommend the clients of 401 (k) plan, to aim putting away at least 15% every month. They need to try this the first three months and if they receive a raise they could also increase the rate.