Earlier this year we learned that U.S. workers view 401(k) plans as a “must-have benefit,” and an updated report from the Transamerica Center for Retirement Studies suggests that many employers also understand the value of these tax-advantaged savings vehicles. Specifically, 77 percent of surveyed employers said that they believe a 401(k) or similar retirement plan is an important benefit to offer when trying to attract and retain talent, including 34 percent who consider such savings tools to be “very important.” A bit of a disconnect, though, still exists because a larger proportion of surveyed workers (81 percent) said that the retirement benefits offered by a prospective employer will be a major factor in their decision-making when job hunting.
That gap has encouragingly been shrinking in recent years, but one likely reason it has yet to completely disappear is differing opinions on retirement readiness. For example, 71 percent of employers said that they are confident their workers will be able to achieve a comfortable and financially secure retirement, while only 64 percent of employees were able to report the same level of optimism about their old-age financial outlook. Although the above figures suggest that some employers have yet to fully recognize just how helpful it can be to offer a retirement plan to their workers, the vast majority of firms fortunately already provide their employees with access to this critical benefit. Apart from attracting talent, another possible motivation for sponsoring a 401(k) plan is preventing delayed retirements. Indeed, 69 percent of surveyed employers said that they expect many of their workers to retire, if at all, after the traditional age of 65, well above the 53 percent of surveyed employees who actually expressed such intent.
Many employers have also incorporated automatic enrollment and auto-escalation into their 401(k) plan design to help workers better prepare for retirement, a smart move considering that workers clearly value such plan features. Eight in ten surveyed employees, for instance, said that they find the idea of being automatically enrolled in a 401(k) or similar retirement plan to be appealing, and the median respondent reported that they would be comfortable with a starting contribution rate of 10 percent, a marked increase from 7 percent in last year’s poll. Moreover, three-quarters of surveyed workers said that they would be likely to take advantage of an automatic escalation feature that would annually raise their contributions by one percent of their salary. Such responses should encourage employers to adopt these and other plan features that can help drive up savings rates among workers, and in turn improve both financial confidence and actual readiness for retirement.
Sources: Transamerica Center for Retirement Studies