Employees are banking on their defined contribution (DC) plans to be a key player in funding their retirement, finds a new survey by human resources (HR) and benefits consulting firm Buck.
The report, “Saving for Retirement: Employee and Employer Attitudes Towards Retirement Benefits,” surveyed employees’ attitudes on top workplace features and found that 70% of workers expect their workplace plan to completely finance their retirement.
Nearly half of all employees (45%) believe they need more than $1 million to retire, and 10% believe they need more than $2 million.
“DC plans have evolved to become the primary retirement savings vehicle for Americans, and for plan sponsors, the challenge is how to help participants reach their savings goals.”
Tonya Manning, Buck
Despite this belief, more workers cite fears that their plan won’t be able to fund their future lifestyle, as 45% believe they will need more than $1 million to retire, and 10% believe they will need over $2 million.
Additionally, while 79% of employees say they are satisfied with the retirement benefits their employer provides, 76% continue to be concerned over their future retirement given past volatile markets. Thirty-five percent of employees list rising cost of living expenses as a top barrier when it comes to savings, followed by personal debt (20%) and family obligations (11%).
Still, even with their trepidations in mind, over half (53%) of employees would prefer a $500 pay increase rather than a $500 increase in retirement plan contributions, and 79% want supplemental savings accounts, signaling the current short-term financial behavior among participants. Seventy-nine percent want supplemental savings accounts, including emergency savings.
“With rising inflation, it’s not surprising that employees are concerned about their ability to save for retirement and this, in turn, is reflected in the perceived value of employer-sponsored retirement plans,” said Tonya Manning, U.S. wealth practice leader and chief wealth actuary at Buck, a Gallagher company. “DC plans have evolved to become the primary retirement savings vehicle for Americans, and for plan sponsors, the challenge is how to help participants reach their savings goals.”
The survey also fielded responses from employers, finding that 77% rank medical coverage as the top workplace benefit, followed by retirement (70%), flexible schedules (36%), and dental insurance (32%). Ninety-one percent of HR professionals believe their organizations offer competitive retirement packages, despite 61% of employees countering that statement.
According to Buck, 28% of employers think that increasing education and communications could help to improve their retirement benefits, and both workers (52%) and companies (49%) alike say increasing the company match is the best way to improve retirement plans.
For employees, Buck found that the most confusing parts of their retirement plan are withdrawal options, followed by investment options and plan fees and expenses. Furthermore, 39% of employees are unsure if they contribute the required percentage of their annual compensation to receive the full company match, indicating that more employer communications may be needed.
“With today’s financial stressors, it’s critical that plan sponsors regularly assess what policies or strategies are in place to increase retirement plan participation, drive savings rates higher, and improve participant investment outcomes,” said Manning. “This will help boost employee confidence in their retirement plan’s ability to help them reach their savings goals — and enable employers to deliver on their promise to help their workforce retire with dignity.”
SEE ALSO:
- Auto-Enrollment in Government Plans Grows Big, But Auto-Escalation Lags: Report
- What to Consider When Contemplating an Annuity for a Defined Contribution Plan
- Workers With Employer-Sponsored Retirement Plans Save $624K More
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.