Access to workplace retirement plans is no longer considered a job perk to employees, but a necessity instead.
A new study released today by Vestwell, which surveyed 1,200 employees nationwide on savings habits, evolving benefits, and challenges, finds that 85% of respondents expect their employer to offer retirement benefits, up from 72% last year.
Additionally, 89% of survey respondents say they would be more likely to continue working for an employer who offers a retirement benefit.
“Employees are increasingly viewing financial wellness offerings as a ‘must-have’ in today’s workplace environment. With inflation fears and uncertain economic outlooks affecting retirement goals, employers and advisors have a huge opportunity to enhance their offerings beyond the traditional 401(k),” said Aaron Schumm, founder and CEO of Vestwell, in a statement.
Vestwell’s findings also show a clear disconnect between participants’ investing goals and their actual contributions. According to the research, among Vestwell’s 401(k) and 403(b) account holders, the average deferral rate in 2023 was 6.4%. While 62% of savers believe they should defer 10% or more of their salary to retire comfortably, only 34% contribute that much.
In fact, the average annual contribution amount for each generation stayed within $2,000 in 2021 and 2022.
The financial wellness platform points to a lack of affordability for the disconnect, as 40% of respondents say their biggest concern in saving for retirement is not being able to afford contributing. When asked what would motivate them to allocate more to retirement, 62% said a higher salary and 18% said an increased employer 401(k) match, while 11.7% want remote work opportunities and 5.1% look for flexible work hours.
According to Vestwell, another 98% of participants “attributed some level of importance to haveing guaranteed lifetime income payments (such as a deferred annuity) included in their workplace retirement benefits.”
As SECURE 2.0 legislation present opportunities for employers to introduce new retirement-focused benefits, Vestwell believes more businesses have the chance to affordably offer retirement plan benefits and employer matches. Such an opportunity also provides openings for financial advisors to work with their employer clients in enacting these changes for workplace plans.
“As retirement savings continue to be a priority for American workers, financial advisors and employers are poised to play a pivotal role in shaping more robust and accessible retirement savings solutions in 2024,” the company writes in its report.
Beyond the 401(k) plan
Vestwell’s research also highlights the fact that workplace benefits are evolving—while participants want traditional retirement plans, they’re also advocating for student loan debt assistance, 529 savings accounts, emergency savings benefits, health savings accounts (HSAs), and more.
According to the findings, 74% of participants with student loans say they would be more likely to stay with their employer if they were offered student loan-related benefits, and 73% place some level of importance in having a 529 savings account in their benefits package.
Another 70% of respondents would like to participate in an emergency savings account, and 87% of employees believe it’s important to have an HSA included in their benefits.
Others seek financial guidance—41% of respondents said they plan to work with a financial advisor in the future, and 94% see value in a tool that offers digital personalized investment suggestions.
Financial advisors have a clear opportunity here to serve as a point person for their employer clients, Vestwell states. “Financial advisors also have a crucial role in guiding employers through the nuances of these expanded offerings, along with the legislative changes brought on by the SECURE Act 2.0,” the company writes. “Advisors should actively consult with their employer clients on the benefits and implementation of these valuable savings vehicles.”
SEE ALSO:
- Financial Wellness Month: Younger Americans More Likely to Feel ‘Economically Empowered’
- Companies Cite Rising Costs of Living for Providing Financial Wellness Benefits
- Employers Taking a More Proactive Approach to Financial Wellness
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.
