Dollar$ and ₵ents: Transitioning Decisions into Dollars for Defined Contribution Participants

Can we be frank? Participants in DC plans don’t care about “basis points,” “alpha”, “benchmarks” or “percentile rankings.” They care about how much money is in their account and what they can do to get more of it. Members of NEPC’s Defined Contribution Team led a session at our 2019 conference that translated industry jargon and trends into dollars and cents. Watch this presentation to see how it is done.

Assumptions: Enrollment at a deferral rate of 6% with auto-escalation to 10% (increases 1% a year). Company match of 100% on first 3%. Salary of $50,000. Raises of 2.25% a year. Inflation of 2.25%. Decumulation uses a replacement ratio of 50% of final salary increased annually for inflation. No contributions are made with an outstanding loan. Return assumptions are based on a 60% US Large Cap/40% Core Bond Allocation and NEPC’s 5-7 year capital market assumptions for non target date funds. Return assumptions are based on the Morningstar average target date fund glidepath and NEPC’s 5-7 year capital market assumptions for target date funds.