Vast Majority of Workers Favor AE
With many American workers saying they could have saved more, and sooner, a large majority of employees support access to plans with automatic enrollment, according to new studies.
American Century Investments’ third annual “Defined Contribution Plan Participation Study
” interviewed 2,031 DC plan participants between the ages of 25 and 65, and 70% of those surveyed supported auto-enrolling new employees at a 6% contribution rate. A majority of respondents also were in favor of expanding this mandate to current workers as well.
The survey largely found that most workers want their employer to, at minimum, nudge them toward retirement. Some of the findings included:
- Nearly 80% would be open to automatic contribution increases.
- Over 70% support their employers implementing a plan investment reenrollment into TDFs.
- More than 70% also say saving for retirement is one of their biggest financial goals.
In addition, the study reported that, when given the hypothetical task of choosing between two job offers — one at a lower salary but with an employer-sponsored retirement plan, and the other at a higher salary but no plan — respondents were five times more likely to take the job that offers a plan.
While workers largely support increasing retirement savings contributions, many of them also express doubt about their own ability to retire. Nearly 90% of respondents expressed at least some regret about how long they waited to start saving; about 75% said they could have saved more in the past, with most of those employees saying they could have saved much more than they did in the first five years of work.
A survey by the blog Financial Engines
found a similar result regarding the timing of saving. More than two-thirds (68%) of adults 55 and over admit to procrastinating on retirement planning, on average 10.6 years later than they felt they should have. The reasons offered for procrastination were varied:
- 50% blamed stress for their procrastinating
- 40% said they had higher priorities, even though they were interested in retirement planning
- 24% were worried about being taken advantage of
- 23% were not sure how to go about it
- 20% believed it was too difficult
“In fact, not saving enough for retirement was mentioned more frequently than not doing better with personal relationships or careers,” said Diane Gallagher, who heads up ACI’s DCIO practice management division.
And that procrastination can cost one dearly, according to Financial Express. Its recent study says that a saver starting at age 35 would have to save 11.69% of their pay to catch up to a 25-year-old saver who was saving just 6% of pay by age 65. And a saver who waited until 40 would have to save 16.44% of pay to have the same amount at age 65.
While a large portion of ACI’s survey’s respondents supported their employer having a bigger role in their personal retirement planning, just a fraction said their bosses had actually helped them save. Just 14% of respondents said their employers did everything they could have done to encourage saving.
“Even though plan sponsors don’t think plan participants want them to intervene, in reality, they are looking for a higher level of support,” Gallagher said. “Although participants are technically able to drive, they are willing to be attentive passengers with their plan sponsors steering the car.”