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Data & Research October 1, 2008
Employees Still Need Retirement Planning Help
An Aon Consulting employer survey confirmed the long-held notion that many employees don’t know how big of a retirement nest egg they will need.
Reported by Fred Schneyer
An Aon news release said its “2008 Benefits & Talent Survey” found only 10% of employers believe their employees understand to a great or very great extent the percentage of pre-retirement income they will need to maintain their current standard of living in retirement. Some 46% of employers said their employees only understand to some extent. The survey covered more than 1,100 U.S. organizations.
Meanwhile, 68% of employers who offer personalized Web-based retirement planning tools estimate that less than half of their participants used them in the past year.
Not only are many workers hazy about how much they will need in retirement savings, but other employees aren’t even in their employer’s plan, Aon found.
About 40% of organizations with DC plans have less than 70% of their workforce participating. According to 67% of employers, employees do not participate in the plan because they cannot afford to make contributions.
“Employers should strive for 70% or higher employee participation rates,” said Cecil Hemingway, executive vice president and Aon Consulting’s U.S. Retirement Practice leader, in the news release. “A mark of less than 70% indicates a poor plan, poor communication, or both. During this economy, employers should emphasize the financial advantages of contributing to a 401(k) plan, such as being able to reduce federal income taxes and receive employer matching contributions.”
Aon said employers are trying to help their employees get a better idea of their retirement savings needs:
- 65% of employers offer Web-based retirement planning tools;
- 56% provide retirement planning information from their recordkeeper, defined contribution consultant, or financial planning partner;
- 36% provide personalized retirement planning statements.
Finally, the poll also asked about steps employers are taking to boost participation. Some 92% of organizations offer an employer contribution, with about one-third of employers offering a 3% contribution for a 6% employee contribution.
Thirty percent of employers currently offer automatic enrollment and of those employers, 56% use a target-date retirement fund as their default investment fund. Almost 18% of employers use automatic increases in defined contribution deferrals, according to Aon.