Data & Research May 29, 2014

Participant Retirement Savings Rebounded from Recession

Average 401(k) account balances have increased 93% since the economic downturn of 2009, according to research from The Principal Financial Group.
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While much of the increase reflects a rebounding market, the study found a significant increase in participation and savings rates since the market collapse, with account balances rising 17% in 2013 alone to an average of $54,000.

The study found a significant increase in the number of employees taking action to increase their contributions or deferrals into their employer’s plan. The number of participants choosing to increase their contribution rates has increased nearly 70% since 2009. The average employee contribution rate has increased 14% from 2009 to 2013.

“The economic downturn may finally be in the rear view mirror, but the lessons learned from the crisis are hopefully influencing our savings habits as a nation moving forward,” says Jerry Patterson, senior vice president of retirement and investor services for The Principal. “While we still have a lot of work to do to help Americans save at more adequate levels for retirement, these numbers are a positive sign that retirement savings are moving in the right direction.”

Patterson says changing plan design features to help make savings more automatic can capitalize on the upward trend and accelerate overall participation and savings rates.

The Principal recommends several key automatic plan design features, including:

  • Automatic enrollment with at least a 6% elective deferral;
  • Automatic escalation of deferrals by at least 1% per year up to 10%;
  • Re-enroll all existing employees into the plan at least one time at the default deferral rate;
  • Stretch the match by using a formula that incents employees to defer at higher levels in order to get the full employer match; and
  • Use an asset allocation choice as the qualified default investment alternative.

The study, conducted by The Principal Knowledge Center, analyzed more than 1.8 million participants enrolled in an employer 401(k) plan with the Principal Financial Group from 2009 to 2013.

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