In our fifth national survey of plan participants, we again heard common themes about participants’ perceptions on saving for retirement. As in years past, the results revealed that employers and plan administrators can have a profound influence on an employee’s ability to save for a secure future.
Key Retirement Savings Themes
In this 2017 research, we surveyed two groups of employees: Pre-retirees ages 55 to 65, and a broader group between the ages 25 to 54. Regardless of age, we heard three consistent themes:
- Regret: Participants acknowledge a great deal of regret about when they started and how much they have saved for retirement.
- Realization: They realize the real value of a defined contribution plan at work and consider it a critical employee benefit.
- Reliance: Employees really do rely on their employers for decisions about saving and investing for the future.
Savings Regrets Are Significant
Nine in 10 participants expressed at least a little regret about how they have saved and invested for retirement. In fact, not saving enough for retirement was cited as the most common personal regret. It ranked above not being a better person, and not doing better in personal relationships.
The broad group of employees ages 25 to 54 was more likely to have regret about not managing their own careers better. However, not saving enough for retirement still came out on top. Further, two-thirds of plan participants point to the first five years of working as the period for which they have the most regret. That speaks to two key elements:
- Participants recognize the power of compounding. They understand that if they had started earlier, there would have been more opportunity for potential growth.
- Participants also acknowledged their own tendencies and habits. Had they started earlier, they would have continued on the savings track for the rest of their careers.
Employees Highly Value Retirement Plans
With respect to retirement plans, more than 80 percent of plan participants believe their DC plan is one of their most important benefits. Further, two-thirds feel more positively about an organization that offers automatic programs: automatic enrollment, automatic escalation and qualified default investment alternative re-enrollments.
Nearly 60 percent of plan participants value an employer-sponsored plan over a state-run retirement plan. That’s something to consider as more and more states look to offer these benefits.
Employee Reliance on Employers
Participants expressed a strong reliance on their employers and the decisions employers make on their behalf. A large majority said they would have more in their personal savings if their employers had deployed everything at their disposal to help them save. In particular, employees said they’d have more if employers had told them how much they should save.
More than eight in 10 participants are looking for at least a slight nudge from their employers on saving and investing. Specifically, over 70 percent support automatic programs, like automatic enrollment and automatic escalation.
Interestingly, there are some impacts for compensation and benefits. Three-quarters of plan participants said they would take a dollar-for-dollar match on three percent of their contributions over a higher salary. Further, nearly 80 percent of pre-retirees and 70 percent of that broader employee group would take a dollar-for-dollar match on six percent of their contributions over a six percent higher salary.
That preference for retirement benefits may have implications for plan sponsors and their consultants as they design compensation and benefits packages for their employees.
Review the complete findings from our 2017 Participant Survey.
The opinions expressed are those of Diane Gallagher and are no guarantee of the future performance of any American Century Investments portfolio.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
Survey Methodology: The survey was conducted between July 27 and August 3, 2017. Respondents included full-time workers between 25 and 65, currently participating in their employer’s retirement plan, intending to retire at some point and not working for the government. A total of 1,500 respondents completed the survey. The data was weighted to reflect the makeup of key demographics (gender, income, and education) among all American private sector plan participants between the ages of 25 and 65 (according to estimates from the 2012 U.S. Consumer Population Survey).Percentages in the tables and charts may not total to 100 due to rounding and/or missing categories. Data collection and analysis were completed by Mathew Greenwald and Associates of Washington, D.C.