Too few employees are participating in companysponsored 401(k)pl$, and those who do sign up frequently make poor investment choices. says Charles Schwab.
The chairman of Charles Schwab Corp., the San Francisco-based discount brokerage firm, said companies needed to do more to encourage participation in the plans, which enable corporate employees to earmark a tax-free portion of their salaries for retirement.
Speaking at an employeebenefits conference sponsored by Coopers: & Lybrand. Mr. Schwab said he was particularly worried about the choices made by 401(k) plan participants.
Many of them put the bulk of their moniey in fixed-income funds or money market funds. which are safer than stock funds but have provided far lower long-term returns. Mr. Schwab said.
He urged companied to use videos to explain 401(k) plans and to provide participants with annual written statements incorporating graphics to show how-tax-exempt savings can accumulate.
"Just a brochure is not good enough," Mr. Schwab said.
"We're going to have to make it so easy for employees to make the right kind of choices," he added.
He noted that 78% of the employees at Schwab participate in the 401(k) plan, a much higher rate than at most companies.
Unless the participation rate increases, "we're going to have a population 10 to 15 or 20 years from now that is not going have any sav- ings," said Matt Ryan, a Coopers & Lybrand partner in New York.
