Average life expectancies continue to rise thanks to an accelerating pace of medical innovation. However, one of the potential downsides of a longer lifespan is that it means Americans will have to set aside a lot more money for retirement if they want to be able to live comfortably throughout old age. That is a big problem because many people already struggle with habitual saving and this growing financial burden, along with the expanding role of self-funding, will therefore put more Americans at risk of outliving their assets. Retirement, though, is not the only issue on Americans’ minds.
An earlier poll from GoBankingRates, for instance, found that although more than a quarter of surveyed U.S. adults (26.4 percent) said that they think about “money” the most every day, 26.2 percent reported that they think about “work” the most and 17.0 percent said that that they think about “health and fitness” the most. Respondents also cited politics and relationships as issues that they stress about on a daily basis. Add to that the fact that the money-related issues people regularly worry about often have more to do with near-term financial challenges like covering monthly expenses and paying off credit card debt and it becomes clear that there are lots of things that can distract Americans from making retirement a top priority.
That can lead to procrastination, which is one of the worst things a person can do when it comes to retirement planning and saving. Indeed, starting early not only provides retirement savers with more time for their investments to grow but also more time to recover from temporary setbacks, e.g. large stock market drawdowns. Further, the sooner one can start to regularly set aside money for retirement the smaller the required annual contributions will have to be in order for a savings target to be met. Fortunately, employers are generally aware that their workers often do not make the timeliest decisions when it comes to retirement, and many have responded by incorporating automatic enrollment into their 401(k) offerings.
In fact, a study from Deloitte/IFEBP found that 88 percent of surveyed plan sponsors reported that automatic enrollment has had a positive effect on overall plan participation, and 70 percent said that average contribution rates have also benefited from automatic enrollment. Among the few employers that have yet to utilize automatic enrollment, the top-cited reason for not doing so is that they already have very high participation rates and therefore see little need for it. Another reason cited by employers for not incorporating automatic enrollment is the belief that doing so would be too expensive and complicated. This does not have to be the case and as usual we are here to help, as well as answer any other questions you may have about plan-related issues.
Sources: United Nations, GOBankingRates, Financial Engines, Deloitte, International Foundation of Employee Benefit PlansPost author: Charles Couch