The ING Retirement Research Institute study found that a majority of workers (87%) said they could be saving more in their employer-sponsored retirement plan. Of the 1,000 workplace retirement plan participants surveyed, nearly two-thirds (64%) said their employer-sponsored retirement plan accounts for all or most of their retirement portfolio.
According to a press release, the survey indicated that plan participants lack a clear understanding of contribution rates and the lifetime value of even small increases. When asked to estimate the lifetime value of a 2% increase in their contribution rate, 40% of respondents underestimated by 50% or more and just about a third (32%) over-estimated by 50% or more.
For many workers, setting contribution rates appears to be either a guess or a back-of-the-envelope calculation, the announcement said. Very few respondents consulted outside resources in determining their contribution levels. Nearly two-thirds (65%) determined their contribution rate themselves, and one in five (21%) said they “go by gut feeling.”
The survey also found that of those participants not contributing the maximum to their retirement plan, an overwhelming majority (87%) admitted they could afford to increase their annual contribution by 1% of their annual salary; almost six in ten (59%) said they could up their contribution by 3% of salary; and nearly one third (32%) said they could afford a 5% increase.
The Importance of a Workplace Retirement Plan
Forty-four percent of plan participants polled admitted that if they didn't have a retirement plan at work, they probably wouldn't be saving for retirement at all. Most respondents (58%) said their employer-sponsored retirement account is their first investment and over half (52%) said their plan is the main place they learned about investing.
More than two out of five (42%) said all or most of their investment knowledge comes from managing their employer-sponsored retirement account.
Respondents cited their employers as having the most influence in getting them to start saving for retirement, followed by family and friends, according to the press release. In addition, their employer match was cited by most participants as the most important reason they contribute to their workplace plan.
Still, over half (55%) of respondents agreed that if their employer provided them with more detailed education, they might contribute more to their plan. Seventy-two percent said they wish their company customized information for their personal situation."For many working Americans, an employer-sponsored retirement plan isn't simply a stepping stone into the investment world, it's the foundation for their future investing education and financial decision-making," said Catherine Smith, CEO, ING U.S. Retirement Services, in the announcement. "The lessons learned in managing a workplace retirement plan are critical, and they can make the difference between a long and comfortable retirement and a retirement that falls well short of their dreams and goals."