A new study by TIAA takes a plan sponsor perspective on participant retirement savings, and includes strategies employers are using to show the value of saving.
The study found that plan sponsors commonly cited several ways to help employees catch up on retirement savings, including providing access to professional advice, providing visual aids, helping with budgeting, and implementing automatic enrollment features.
TIAA’s research focuses specifically on participants who have fallen behind on their savings or who have not saved at all, and surveys employers on their common approaches to incorporating long-term savings tools for these individuals.
According to the findings, plan sponsors say providing retirement income projections to those who have dropped behind is the most effective way to motivate more contributions. Specifically, walking participants through these projections for retirement income can reinforce the need to stay on course, TIAA reported.
“I think education is key. If participants don’t know how short they are on their projected monthly income, they won’t feel the need to save more,” one plan sponsor was quoted as saying. “We need to break it down in simple terms for them and how the savings translates/projects out to the income stream needed at retirement.”
However, some plan sponsor respondents hesitated enacting this approach, noting that it could frustrate participants who see the approach of asking about personal financial lives as intrusive or even condescending. “Unless an employee is explicitly saying “I don’t know how to manage retirement planning; what do you advise?” I find that they kind of resent tailored/personalized direction–they feel either that it is intrusive, or they’re being infantilized,” another plan sponsor argued in the study.
Others completely opposed the idea of providing financial strategies, adding that providing specific help to participants who have fallen behind is beyond their role. Instead, those employers said they believe it is the responsibility of the participant to save for retirement. “We have a more ‘hands-off’ approach,” one plan sponsor noted. “We provide resources and opportunities for participants but feel they must be accountable for their retirement and financial decisions.”
While some put the onus on participants for not saving enough, most plan sponsors blamed rises in cost-of-living, student loan debt, and low salaries for why participants have a hard time saving. As a result, some are enacting newer strategies to help their workers achieve financial goals.
“I think most young people have student loan debt and retirement is the last thing on their mind,” reported another plan sponsor. “I want to implement the Secure Act 2.0 student loan match provision next year if possible. It will at least help them get on track for retirement.”
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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.
