SRI Details Employers’ Role in Retirement Readiness

Employer involvement looms large in the overall retirement readiness picture. And current trends regarding financial preparation for retirement buttress the importance of employers acting on how influential they are. 

How large? According to the Secure Retirement Institute® (SRI), actions by employers are more influential than any other factor in employees participating in a retirement plan and saving for retirement. “Having access to an employer-sponsored retirement plan significantly improves the likelihood of workers saving for retirement,” says SRI in its National Retirement Security Month Fact Sheet, 2021. The top reason workers told SRI that they save for retirement is that their employer offers a retirement plan; 37% cited that as why.  The second biggest reason—the employer match—was what pushed 28% to start saving for retirement. And number three—being automatically enrolled in the employer plan—was cited by 20%. No other motivation cracked 20%.

This takes on added significance in light of another SRI finding: 71% of workers in the United States, which translates to just under 100 million people, have access to retirement plans through their employers. 

Work to Do

The influence employers wield in influencing employees to save for retirement and the degree of access to workplace plans suggests that there is hope to make progress in the work that SRI also found needs to be done. 

Participation. SRI found that while just over 70% of U.S. workers have access to such plans, 55% of them actually do. They also found that just over half of U.S. households have a retirement plan balance in a defined contribution plan and/or an IRA. 

Savings. Dollars and cents raise concern as well. SRI reports that a little more than one-quarter of the combined population of Baby Boomers and Generation X—those roughly ages 42-75—reported that they have saved less than $50,000 for retirement. Two-thirds of them save less than 10% of their compensation in employer-provided retirement plans, and 37% set aside less than 5%. And among those with any savings, the median retirement savings amount to $64,000; the average amount that retirees and pre-retirees have saved in retirement accounts is $400,000.

Confidence. Just 55% of U.S. workers are confident they know how much they should save, SRI reports. They add that overall, 57% feel at least somewhat confident in their ability to pursue the lifestyle they want to during retirement, and those who have a formal written retirement plan are twice as likely as those with no such plan to be confident that they can do so. 

Longevity. According to SRI, 57% of all American workers are concerned that they will outlive their retirement assets, and even 32% of retirees share that sentiment. As SRI notes, 25% of 65-year-old men of average health will live to age 89 and 25% of 65-year-old-women will live to age 92; those ages are well beyond the 2021 U.S. life expectancy of 77.3. 

Federal Safety Nets. Consumers also expressed concern with SRI about the possibility of lower Social Security and Medicare benefits. Furthermore, 40% are increasingly concerned about long-term care and health care expenses Medicare does not cover.