Holding steady with savings contributuons, even during times of market uncertainty, can drive long-term growth in portfolios.
That’s one of the main findings in Empower’s latest corporate report, “Empowering America’s Financial Journey,” which showed that participants enrolled in retirement plans for a minimum of five years saw balances grow by 2.1 times compared to figures in 2020.
Participant engagement is a top driver of long-term progress, Empower stated. Participants who feel connected to their plan are 1.5 times likelier to save up to their employer match and 1.8 times more likely to save past it.
“We know participant engagement is one of the strongest drivers of savings behavior, more than any other measurement,” said Rachel Molina, head of Workplace Thought Leadership at Empower. “The data showed us that on average, engaged individuals earning less than $40K a year are saving at higher rates than unengaged participants across every income level, including those making significantly more.”
Plan resources, like automatic enrollment, are driving much of this change, Empower observed. The average participation rate for plans utilizing auto features was 86%, compared to 36% for plans who go without such benefits.
Further, plans with auto-enrollment default rates of 7% or more had the highest participation rates at 90%, as well as leading savings rates at 9.6%.
Implementing these features could ultimately lead to improved participant behavior and higher account balances, as prior research has noted.
Employers who offer additional engagement strategies, including auto-escalation, reenrollment, and access to advice are also likelier to see higher contribution rates.
Other employers are shifting their retirement plans towards broader platforms that focus on financial wellbeing—a trend that Empower expects to prevail over the next five years. This includes moving towards artificial intelligence (AI) and digital capabilities that help participants engage with plans; aligning retirement plans with healthcare savings, equity compensation, and other benefit programs; and broadening access to alternative investment options, reported Empower.
Ultimately, Empower expects more companies to widen their retirement plan programs, as participants seek resources that help them in all facets of financial planning.