Over half of employees who say they’re contributing to their retirement are actually not, reports new findings from Principal’s Retirement Security Survey.
According to the report, which fielded responses from 2,050 workers, 59% of employees who are not contributing to their 401(k) or other workplace plan believe they are. Another 77% think they began saving after becoming eligible to contribute, showing a serious lack of retirement planning education and communications among workforces and their employees.
Others know they’re not saving despite being eligible, either because or competing, high monthly expenses (39%), paying off debt (36%), and insufficient income (34%).
Still, automatic retirement features and consistent communications could persuade employees to contribute towards the long-term, reports Principal. Survey findings show that 62% of employees say they would continue to save in a workplace retirement plan if automatically enrolled by their employer. Meanwhile, plans who incorporate auto-enrollment are “at least twice as likely” to see a 90% participation rate compared to plans that do not offer the benefit.
“American workers are balancing a lot right now and it can feel overwhelming to employees who are trying to meet their needs today and invest in their long-term financial security,” said Chris Littlefield, president of Retirement and Income Solutions at Principal. “Through good plan design features like automatic enrollment and regular communication, we have seen significantly improved savings and participant engagement.”
Principal also notes the behavioral aspects that favor automatic features. For example, some participants choose to completely forego contributing because they are uncertain with how much they should put away towards retirement. When asked how much they would need to save in order to maintain their standard of living, 34% said they had not thought about it. Of those who did, 44% believe they should be saving between 10% to 25% of their income.
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