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