Americans have many financial aspirations. For example, eliminating debt, funding a vacation, purchasing a house, creating an emergency fund, and making better investment choices were some of the most commonly cited financial goals of American workers in a Retiremap poll. The top financial achievement, though, was setting enough money aside for retirement, a sentiment that too often is not supported by behavior. Indeed, there are numerous studies showing that an alarming number of Americans are not saving enough to ensure old-age financial security. Why does this occur?
A study from Wells Fargo found that 62 percent of surveyed working adults said that actually saving for retirement is harder than they had anticipated, and 35 percent reported that covering monthly bills hinders their ability to set money aside. Sixty-eight percent of worker respondents also said that they wish they had started saving for retirement earlier, and not even half (45 percent) described themselves as being consistent savers. Fortunately, there are various steps that businesses can take to help get their workers on the right track for a secure retirement. For instance, 69 percent of surveyed employees said that they have access to a 401(k) plan through their employer.
Going forward such statistics will likely increase as the shift from defined benefit plans to the defined contribution structure continues in America. Further, the increased adoption of automatic enrollment, reenrollment, auto-escalation, and similar plan design elements could lead to significantly higher levels of participation. That is good news since worker respondents utilizing 401(k)s were found to have saved four times more than those without access to such plans when they set money aside consistently. Surveyed workers already participating in an employer-provided 401(k) also reported that they are quite fond of their defined contribution plans.
Specifically, 84 percent of employee respondents said that they feel more secure about retirement because of their ability to make regular contributions to a 401(k) plan, and roughly three in four surveyed workers admitted that they probably would not have as much money set aside for retirement if they did not have access to this tax-advantaged savings vehicle. Another 72 percent of respondents reported being satisfied with their 401(k) as a retirement savings tool, and 61 percent said that they feel they are able to save enough through their 401(k) plan to live comfortably in retirement.
Sources: Retiremap, NAPA, Wells FargoPost author: Charles Couch