Employees Open to Retirement Savings Intervention

Two in five retirement plan participants polled said employers should give employees “a slight nudge” in encouraging them to save for retirement.

An additional two in five want either “a strong nudge” or a “kick in the pants,” according to the national survey conducted by American Century Investments. Only one in six want their employer to “leave (them) alone.” However, plan sponsors believe three in 10 employees want to be “left alone,” and only 25% want more than a “slight nudge.”

A majority of participants (64% of those ages 55 to 65, and 59% of those ages 25 to 54) indicated they feel having automatic enrollment would have led to at least a minor increase in retirement savings. Additionally, both groups favor a higher default contribution rate for automatic enrollment—more than 60% agree it should be 6%. Also, seven in 10 participants are at least fairly interested in having a program that would increase their savings by 1% each year.

Nearly all (98% of 55- to 65-year-olds, and 96% of 25- to 54-year-olds) feel it is important for plan sponsors to show them the income that various levels of savings will produce in retirement, yet only about half said their employers offer projections, calculators or educational seminars.

While participants overall gave their employer a grade of “B-“ for providing a plan that offers them the opportunity to save, invest and accumulate retirement savings, plan sponsors rated themselves somewhat higher: One out of five plan sponsors gave themselves an “A,” and another 63% gave themselves a “B.”

Participants are looking to employers to help them get started saving for retirement and are open to intervention, according to American Century Investments Vice President, Defined Contribution Investment Only (DCIO) Practice Management, Diane Gallagher. “Our research indicates a bit of a disconnect between the amount of intervention participants are open to receiving from their plan sponsors, and the amount that plan sponsors think participants want.”

Survey participants acknowledged the importance of saving for retirement, but a majority—nearly two-thirds of 55- to 65-year-olds and six in 10 of those ages 25 to 54—regret not doing a better job. The majority of participants across all age groups said they wish they had saved more in the first five years of their careers and identified it as the key time period they saved too little. “Roughly half of the participants admitted that not saving for retirement early on was one of the biggest mistakes of their lives,” said Gallagher.

A substantial majority of individuals surveyed (92% of 55- to 65-year-olds, and 88% of 25- to 54-year-olds) reported that if they could have talked to themselves earlier in their career, they would have advised themselves to save more for retirement. However, half of all age groups said they would have been only “somewhat likely” to listen at that age.

Roughly three out of four participants in each age group said they could have saved at least a little more over the years, but more than half say they are currently saving less than they need to. Furthermore, participants graded themselves a “C+” average when it comes to saving for retirement, but the numbers were slightly higher when asked to grade themselves on the job they did investing their retirement plan money.

The younger group listed not earning enough and paying off debt as their two biggest issues, while the older group (ages 55 to 65) reported family expenses, such as living expenses associated with their children, spending on vacations and college expenses, as priorities that prevented them from saving more.

Despite their varied financial priorities, roughly two out of three participants expressed concern about not having enough money in retirement and more than nine out of 10 participants agree that saving more for retirement will allow them to better handle the challenges they face when they get there. Additionally, most participants think it is far worse to have too little money in retirement than to lose the opportunity to enjoy money today. Also, most say it is at least somewhat likely they will take steps, such as paying off loans and mortgages and working longer or part time in retirement, to improve their prospects.

The survey was conducted during the first quarter of 2014 among 1,619 full-time employed individuals between the ages of 25 and 65 who are currently participating in their employer-sponsored retirement plan.