The 401(k) savings gap is a plan-design problem

Financial Planning's 401(k) Day checklist, marking the 30th anniversary of the Plan Sponsor Council of America's savings push traditionally held the Friday after Labor Day and moved this year to avoid colliding with Sept. 11, carries a Fidelity research spread wide enough to read from the plan sponsor's desk: boomers contribute an average of 12.20%, Gen X 10.50%, millennials 9% and Gen Z 7.50%. The likelier explanation for that ladder is design, not discipline.

The council's own framing is that automatic enrollment and escalation help, but individuals still have to make decisions — which is where the advisor embedded in the plan earns a place, and where Morningstar finds contribution rates run higher when defined contribution plans offer managed accounts, the personalized portfolios the checklist compares to robo advisors. Daniele Griffith, director of tax operations at the New York City tax planning platform April Tax Solutions, told Financial Planning why the arrangement travels: employees are more comfortable talking with an advisor their employer makes available than seeking out an outside planner they suspect of being sales-oriented.

An advisor inside the plan is playing a different game from the one waiting at the door for the rollover, and as this publication has argued, when fund selection commoditizes, advice becomes the product — the workplace plan is where the advice relationship starts, years before an IRA is in play. The enrollment meeting is a scheduled introduction the employer convenes, while the transfer call is a decision the client shops; that asymmetry is the case for building the 401(k) relationship instead of harvesting it.

The rollover is the item most advisors already know, and it is where the decision gets consequential: leaving a job opens the move into an IRA, traditional for pre-tax contributions and Roth for after-tax ones, but the checklist flags a tradeoff that cuts against a reflexive transfer — a participant who might want to borrow from the plan cannot take a 401(k) loan from an IRA. For a client whose cash buffer is thin, that single constraint can decide the question.

Compounded over a working life, the 4.7 points between the boomer and Gen Z contribution rates is what plan-level advice is playing for — and it is on the table a generation earlier than the rollover balances the industry spends its marketing on. The firms that collect it will be the ones whose names are already on the enrollment materials.