Similar salaries don’t necessarily mean similar savings rates, a maddening quirk of human behavior EBRI and J.P Morgan Asset Management set out to study.
The organizations find that, despite having similar salaries, the middle 50% of the research population save about 3% more of their salary at all ages than the bottom 25% of savers.
This 3% difference in savings behavior, if sustained over time, could ultimately explain some of the meaningful gaps between the current retirement plan account balances of middle and low savers.
The study also suggests that for most households, a 401k appears to be their primary retirement savings vehicle, underscoring the importance of the employers’ role in savings.
Importantly:
Middle savers save 3% more salary than low savers
Low savers reach 1x salary in 401ks, middle savers 2x
Low savers spend 2%-3% more than middle savers
Low savers spend more on housing, food, beverage
The study is part of a new collaboration between the Employee Benefit Research Institute (EBRI) and J.P. Morgan Asset Management, which was announced on Wednesday. The project will leverage 22 million Chase households and 27 million 401(k) plan participant records, offering “the first truly holistic view of how U.S. households spend and save.”
“EBRI has been analyzing 401k participant behavior for decades based on the EBRI/ICI Participant-Directed Retirement Plan Data Collection database,” Lori Lucas, President and CEO of EBRI, said in a statement. “This new collaboration with J.P. Morgan takes this analysis to another level as we can now gain insight into both the spending and the saving sides of the equation to better understand people’s full financial picture.”
“This collaboration is a significant milestone for the retirement industry, harnessing Chase’s relationship with nearly half of American households and EBRI’s strong pedigree in the employee benefit space,” added Katherine Roy, Chief Retirement Strategist, J.P. Morgan Asset Management.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
