At 36, Gianni Del Signore still has more than a few decades before he retires.
But that doesn’t mean the chief financial officer for Newport-based Pangaea Logistics Solutions Ltd. is not already planning – and saving – for retirement.
“I try as much as possible to max out,” he said of his contributions to his company-sponsored 401(k) plans.
Del Signore’s co-workers share a similar mentality – nearly 85% of the company’s 26 employees contribute to their retirement savings accounts, a factor Del Signore credited to proactive education and the company’s offer to match 25% of what its employees contribute to their retirement accounts.
On average, Rhode Island employers contribute 4.1% of their employees’ salaries to their 401(k)s, according to a new report from Fidelity Investments Inc.
Employer matching is one of the best tools to incentivize people to invest in their retirement, according to Larry Wagner, vice president and financial consultant for Rockland Trust Co. The bank manages retirement savings services for more than 150 area companies, including Pangaea Logistics Solutions.
Still, not all of the companies that use Rockland’s retirement savings services have the same success as Pangaea in encouraging employees to participate in their retirement savings, even with a company match, Wagner said.
“It can be a real challenge,” he said, naming lack of financial education as the biggest barrier. “Some people are just not actively involved in their retirement, it seems.”
‘You’ve got to keep the long-term goal in mind.’
JIM SAMPSON, Hilb Group director of retirement services
But for those such as Del Signore who are already planning ahead, the economy is on their side. Average 401(k) balances have increased dramatically since 2009, according to Fidelity.
That positive, long-term growth is in part what has wealth managers convinced that even the recent volatility in the stock market will have little effect on retirement savings accounts.
“The short-term ups and downs of the stock market are bugs on the windshield,” said Jim Sampson, director of retirement services for Hilb Group Retirement Services LLC. “You’ve got to keep the long-term goal in mind.”
Fidelity’s latest quarterly analysis of retirement savings accounts corroborates this. Data for roughly 60,000 Rhode Island residents shows a 1.7% decrease in average 401(k) account balances, from $111,600 in the second quarter of 2019 to $109,700 by the end of the third quarter. Nationally, average 401(k) balances dropped from $106,000 to $105,200 in the same time frame, the report stated.
Bottom line: retirement savers should not be worried, according to Meghan Murphy, vice president of global thought leadership for Fidelity.
In fact, a dip in the stock market could be the impetus to start saving more, when stock value is lower, according to Sampson. He likened stocks to the real estate market: If the market for selling houses is poor, don’t sell it for a cheap price. Instead, wait for better market conditions.
Gary Friedmann, vice president and portfolio manager for Rockland Trust, agreed.
“We tend to see 401(k) participants allowing emotion to get involved in the decision-making process, which typically leads to poor investment choices,” said Friedmann. “We see a good number of clients typically making the wrong decisions at the wrong time.”
In this case, only 5.1% of retirement savers shifted their investments in the third quarter, according to the Fidelity report. Murphy attributed this in part to the increasing number of savers opting to keep their money in a target-date fund – often used as the default investment option for employers who automatically enroll employees in retirement savings plans.
Rhode Island’s average 401(k) topped national average balances by more than $4,000, a factor Murphy credited to the state’s older population.
“Averages consist of a wide range of people – those who started saving last month and those who have been saving for 30 years,” Murphy said. “A balance slightly higher may indicate that more people have been saving for longer.”
Though they might be saving for longer, they’re not saving as much – Rhode Island employees saved at a rate of 7.9% compared with 8.8% among their national counterparts, according to the report. Similarly, Rhode Island’s employer savings rate falls below the national average of 4.6%.
Sampson attributed the difference to the strength of the local economy.
“Rhode Island as a state has been somewhat challenged from an economy standpoint compared [with] other states,” he said. “Usually, savings rates can be attributed to the economy. If people have money to save, they will.”
That mentality is a marked difference from older generations, who worked in an age when pension plans were still the primary source of retirement funding, according to Jamie Worrell, managing director for Strategic Retirement Partners’ Northeast division. Whether due to workplace and investment education or simply the cautionary tale told by the many baby boomers retiring without much saved, younger generations have taken note and are contributing to some type of retirement savings account earlier and more aggressively, Worrell said.
“People expect to be in a [401(k)-type] retirement plan and they’ve gotten the message,” he said.
