The pressure to live a secure retirement has led to some counterintuitive views about just what will help workers get themselves there.
While 66% of American workers are still planning to supplement their personal savings with income from Social Security, 42% also don’t believe Social Security benefits will even be available to them when they retire, suggesting “overarching confusion” around what sources of income retirees will actually have in retirement.
In fact, the concern is so great that a large majority of Americans are willing to support government intervention, according to survey results contained in “Retirement reality check” by Natixis Investment Managers.
Mandates and Matches
Comprised of 1,000 American workers who are eligible to participate in a company-sponsored DC plan, the findings show that more than half of workers (54%) say they would support a government mandate requiring individuals to save for retirement — and consider that this is amid a political climate that typically rejects government regulation.
Moreover, 53% believe it’s the government’s responsibility to provide universal access to a retirement savings plan, with three-quarters (75%) stating they think employers should be required to provide workplace retirement savings plans.
What’s more, beyond providing access to plans, workers also see a need for funding mandates. According to the findings, two-thirds (68%) of respondents believe employers should be required to provide matching contributions in their workplace savings plans.
Nearly 8 in 10 (79%) respondents who work for an employer that offers at least a partial match cite this incentive as the top reason for participating in the plan. Among those who don’t participate, the top reason for opting out is because their employer does not offer a match or the match isn’t big enough, followed closely by having too much debt to repay.
“It’s not surprising for individuals to want employer matches to be mandatory, but it is surprising to see that 54% also believe personal retirement plan contributions should be mandatory as well,” the authors observe.
Apart from government mandates, a strong majority of respondents believe there is a simpler solution for increasing participation. Three quarters of those surveyed say they would be more inclined to invest in a company-sponsored retirement plan if they could enroll on the first day of employment, allowing them to complete their benefits selection in one sitting.
Education and Advice
While access to a retirement savings plan is the crucial first step, Natixis also found that advice, education and tools to simplify saving and investing are critical factors for maximizing plan participation. Sixty-four percent of participants in a workplace savings plan say they are looking to their employers for more education and guidance such as when, how and why to invest.
Findings that appear to support the need for additional participant education include that:
- nearly two-thirds (64%) of participants age 50 or older are not taking advantage of catch-up contributions;
- 1 in 5 (21%) do not know what type of assets or funds their retirement money is invested in; and
- nearly 4 in 10 (39%) continue to invest in the funds automatically selected for them when they first enrolled in the company plan, indicating the importance of an employer’s QDIA selection.
And while saving for retirement through a workplace savings plan is the first exposure to investing for many workers, fewer than half (48%) receive professional financial advice about investing and managing their retirement assets. Those who are advised contribute, on average, a higher percent of their annual salary to their workplace savings plan (7.2%) versus those who aren’t advised (6.5%).
What’s more, the report notes that Millennials with advisors have saved $89,724 between workplace and personal savings, adding up to a 28% head start on those without advisors. The same advantage holds true for Baby Boomers, where advised participants in this age cohort have saved more than $333,085 compared to $286,671 by those without the benefit of advice. The lone exception is Generation X, where advised participants have saved only 3% more than non-advised, the findings show.
“In order to lead more American workers to a secure retirement, it will require a combination of solutions to improve access to savings plans, education, advice and incentives along with a coordinated effort among individuals, employers, policymakers and asset managers,” notes Ed Farrington, Executive Vice President of Retirement Strategies at Natixis Investment Managers.
The survey was comprised of 1,000 American workers who are eligible to participate in a company-sponsored DC plan. Of the total, 700 workers are enrolled in such a program, while 300 do not participate. Data was gathered in January and February 2019 by the research firm CoreData.