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Retirement Readiness
3 KPIs Needed to Get Employees on Track for Retirement
Last Updated: October 30, 2025
The Problem: Most Employees Are Not on Track for Retirement
Despite widespread availability of 401(k) plans—the primary retirement savings vehicle for millions—too few workers are on track to retire. This shortfall leaves the workforce falling behind, with real human and business consequences.
– Employees delaying retirement
– Financial stress impacting retention and productivity
– Plans that are active—but not necessarily effective
Fiduciary committees, tasked with overseeing 401(k) plans, have the authority and ability to significantly improve the financial future of their employees while simultaneously improving conditions for their employers. The transformation isn’t dependent upon tricks, secrets, or complex techniques.
For 401(k) plan committees that want to improve employees’ retirement preparedness, they should leverage the same management tools they already use in other parts of their business.
The Solution: Run Your 401(k) Like You Run Your Business
Closing the gap requires treating 401(k) oversight like a core business function—goal-setting, accountability, and reporting through key performance indicators (KPIs). Just as businesses expect results, a retirement plan should be managed no differently.
This shift in perspective helps fiduciary committees cut through the noise and focus on what matters most: getting employees on track for retirement. It transforms them from passive overseers into active drivers of their workforce’s long-term financial security.
We expand on this approach in Run Your 401(k) Like You Run Your Business.
This article outlines a framework for closing the retirement readiness gap by applying proven business management principles to 401(k) oversight. Fiduciary committees can improve results by setting a clear retirement readiness goal, assigning ownership for achieving it, and monitoring the right indicators of progress.
Retirement Readiness Is About One Thing: Building Account Balances
If retirement readiness is the fiduciary committee’s goal, and the committee has assigned someone to be responsible for achieving it, the question becomes: how do you know if it’s happening?
At its core, retirement readiness comes down to one measurable outcome: are participants accumulating enough money to maintain their standard of living in retirement? Put simply, it’s about the dollars in their accounts.
To evaluate progress and to hold the responsible party accountable, committees need key performance indicators (KPIs) that directly correlate to what drives participant account balances. The right KPIs provide clear insight into where the plan is performing well and where adjustments may be necessary.
This article focuses on the right KPIs fiduciaries should adopt to determine whether the party responsible is progressing toward the goal of getting employees on track for retirement.
KPI
What It Measures
Why It Matters
Contribution Rates
Average employee savings rates relative to what’s needed to replace income in retirement
Increasing contribution rates is the most immediate lever to improve readiness
Investment Performance
Net-of-fee returns versus an all-index benchmark
Compares whether the plan investment lineup is adding value beyond passive alternatives
Fees
Total costs paid by the plan, including administrative and fund costs paid by participants
Excessive fees erode balances and reduce retirement security
KPI: Contribution Rates
What It Measures
Average employee savings rates relative to what’s needed to replace income in retirement
Why It Matters:
Increasing contribution rates is the most immediate lever to improve readiness
KPI: Investment Performance
What It Measures
Net-of-fee returns versus an all-index benchmark
Why It Matters
Compares whether the plan investment lineup is adding value beyond passive alternatives
KPI: Fees
What It Measures
Total costs paid by the plan, including administrative and fund costs paid by participants
Why It Matters:
Excessive fees erode balances and reduce retirement security
Contribution Rates: The Engine of Accumulation
Retirement readiness starts with saving. No investment strategy, no matter how sophisticated, can compensate for insufficient contributions. Contributions form the foundation of retirement readiness—they set the stage for all future growth and compounding. Without sufficient savings, participants are unlikely to retire on time or maintain their standard of living.
Impact on Retirement Outcomes:
Experts indicate that participants need roughly 70–80% of their pre-retirement income to maintain a similar standard of living in retirement—this is known as the income replacement ratio.
To determine whether employees are on track, fiduciaries can estimate this ratio based on participants’ current savings trajectory. When the average eligible participant in a plan contributes enough to project a 70% (or higher) income replacement ratio, the plan is likely supporting meaningful retirement progress.
The Right KPI:
Contributions for the Plan’s average eligible participant are on track to replace 70% or more of their income in retirement.
Key inputs include average age, normal retirement age, average income, average account balance, and total annual contributions. These figures are combined with assumptions for expected rates of return, salary growth, and plan expenses to calculate the projected income replacement ratio.
Fiduciary Influence:
While participants ultimately decide how much to save, committees can actively influence outcomes through plan design. Tools such as automatic enrollment and auto-escalation encourage participation and help employees steadily increase contributions over time, while employer match structures provide additional motivation to save.
Committees can also support individual outcomes by offering guidance to participants through the plan’s adviser. To advance the goal of retirement readiness, this guidance should be measurable, unbiased, and cost-conscious so participants receive meaningful support in making informed saving and investing decisions.
In this way, contributions are more than just a number to track—they become an actionable lever that fiduciaries can use to improve overall retirement readiness.
Investment Performance: Making Dollars Work Harder
Even if participants are saving enough, balances won’t grow as needed if investments underperform. Investment performance compounds over time—small differences in returns can have a huge impact. Conversely, underperformance can erode years of retirement income.
Impact on Retirement Outcomes:
Returns generated within retirement plans directly affect participants’ ability to retire with confidence. Even modest improvements—25 to 50 basis points (0.25–0.50%) annually—can materially increase account balances over decades, helping participants get closer to their retirement goals.
The Performance Disconnect:
- Most plan fiduciaries we speak with believe they offer an investment lineup that performs well. Unfortunately, evidence suggests otherwise. PCI’s 401(k) Investment Lineup vs. Passive Scorecard Annual Report shows that in only 3 of the last 10 years did the majority of plans outperform an all-index lineup.
This consistent underperformance is largely due to a lack of transparency in reporting. Specifically, reporting of funds that were previously replaced. Many committees are unaware that participant results differ from what is presented in performance reports, which often hide poor returns and make lineups appear stronger than they actually are.
Recognizing this disconnect is critical: committees need clear, transparent reporting to evaluate whether the investment lineup is truly adding value and supporting participants’ retirement goals.
In this 30-minute webinar, we explore how 401(k) fund changes can obscure poor performance. This webinar offers valuable insights into the traditional tactics used to report investment performance and how they may be concealing subpar results.
The Right KPI:
- Plan’s investment lineup to outperform an all-index lineup.
Compare each fund’s rate of return to that of its index benchmark, assuming the fund was in the lineup for the entire period. For each fund, subtract the benchmark return from the fund return to calculate the difference, whether positive or negative. Sum these differences across all funds available in the plan to determine the total value added or lost by the lineup relative to the all-index benchmark.
Fiduciary Influence:
- Many rely on plan advisers to select and monitor funds, and the key lies in their reporting. Committees can influence outcomes by demanding transparency in reporting and accountability for performance.
Plan Fees: Preserving Hard-Earned Savings
Fees are the friction that can erode participant balances. Every dollar spent on costs is a dollar removed from the compounding growth participants need for a secure retirement.
Impact on Retirement Outcomes:
Total costs paid by the plan, including administrative fees, affect how much employees can accumulate. Lower total costs give participants’ contributions and returns a better chance to grow, helping them retire on schedule.
The Right KPI:
Total fees paid by the Plan to be below average for plans of similar size.
Total all costs paid to each plan service provider and compare them to benchmark averages for plans of similar size. Because fees naturally scale with plan size, this perspective is essential. A plan that costs more than its peers may be overpaying or missing opportunities to negotiate more favorable terms.
This comparison gives committees confidence that the plan is not overspending on basic services and is keeping more dollars in participants’ accounts.
Be Wary of Participant-Initiated Services:
Optional services such as managed accounts or income solutions can carry high fees that directly reduce compounding growth. Committees should carefully review these offerings, understand the full cost structure, and evaluate whether the benefits justify the expense to avoid unintentionally eroding retirement savings.
Fiduciary Influence
Committees are responsible for the services provided and the fees paid. Benchmarking fees, reviewing service agreements, and evaluating cost versus value allow informed decisions that support stronger account balances and overall plan effectiveness.
The Path Forward
The good news is that a 401(k) plan can be managed with the same discipline applied to any core business function. By setting a clear goal, assigning responsibility, and actively tracking the key drivers, employers can move beyond passive plan oversight and make the 401(k) a tool that actively drives retirement readiness.
Fiduciaries already know how to manage for results; they do it every day in business. Applying that same rigor to the retirement plan—focusing on contribution rates, investment performance, and plan fees—gives committees the insight to see whether participants’ balances are truly on track.
WHAT NOW?
This is the problem we’re focused on solving. The good news is that it can be solved!
If any of this resonates—if you’re nodding along or feeling the same frustrations—you’re not alone. And you’re not stuck.
Join us for our live webinar, ‘What’s Your Problem, 401(k)?’ We’ll unpack the root issues holding plans back in more detail and share practical, actionable steps employers can take to drive real retirement readiness for your employees
