- Workers show strong desire for enhanced incentives, willingness to accept mandates to ensure retirement security
- Millennials most likely to support mandated solutions, even for themselves
- Survey shows workers’ savings rates are too low to meet retirement goals, but well-crafted plans that align with investors’ values can help
According to the survey, Millennials are much more likely to want substantial change:
- 69% of Millennials, compared to 55% of Baby Boomers, believe individuals should be required to contribute toward retirement savings.
- 82% of Millennials, compared to 77% of Generation X, agree that employers should be required to offer retirement plans.
- 76% of Millennials, compared to 66% of Baby Boomers, agree businesses should be required to chip in and provide matching funds.
- 84% of Millennials want investment options that reflect their personal values.
On average, Millennials first enrolled in a retirement savings plan at age 23, while Gen Xers signed up at age 27 and Baby Boomers at 31. Even though they started saving for retirement earlier than previous generations, Millennials’ openness to 401(k) mandates may stem from a sense that retirement security is increasingly their own responsibility, in part because they aren’t confident
“Retirement planning has become a lot more complex since the first 401(k) was introduced 35 years ago, and the burden of saving has shifted increasingly to individuals over that time,” said
Many not on track to meet savings targets
Six in ten people surveyed claim to know how much annual income they will need in retirement. However, both their savings goal and contribution levels are not high enough to reach their intended targets. Baby Boomers say they’ll need
Even for workers who participate in their companies’ defined contribution plans, their savings rates aren’t high enough to reach projected targets. Two in five (41%) plan participants contribute less than 5% of their annual salaries to employer-sponsored retirement plans. Furthermore, some Americans are undermining their progress by scrambling their own nest egg. Nearly one in three (28%) retirement plan participants, including 43% of Millennials, have taken a withdrawal from their retirement savings plan.
“Younger workers in particular are grappling with a different set of retirement challenges compared to previous generations. Their retirement savings strategies are encumbered by a number of factors such as student loan debt, a lack of company pensions and a sense of doubt that
Steps plan sponsors can take
The survey found that, even when given the chance, many
For the workers who do participate, the biggest draws are company matching contributions (cited by 63%), tax incentives (56%) and the convenience of having money automatically deducted from their paychecks (52%). Additionally, over two-thirds (69%) of workers would contribute more if their employer offered a larger match. Nearly three-quarters (72%) believe employers should be required to provide matching contributions.
The study identifies four ways employers can voluntarily step up efforts to improve retirement savings:
- Financial advice: Professional advice/guidance leads to higher savings levels, better savings and investing decisions. For the participants in its survey, Natixis found that people who receive professional financial advice have saved on average 10% more of total retirement savings than those who go it alone, and 17% said they would save more if they had access to professional advice. With the
U.S. Departmentof Labor’s fiduciary standard scheduled to take effect in April, some workers could lose access to an advisor through their retirement accounts. Employers could step up by offering access to financial advice in their workplace savings plan. Just 30% of active plan participants surveyed say they are offered that service by their employer.
- From participation to engagement: The power of participation is in plan features that overcome savings inertia. Allowing plan participation from the first day of employment may help improve participation rates and increase employee contributions – 81% said they would save more if they could start on the first day they joined a new employer. Automatic escalation features also serve to seamlessly increase contributions, with 23% indicating that would incentivize them to save more.
- Education: Education is needed for plan participants and even more so for non-participants. The survey found that almost half (45%) of all respondents, including 38% of plan participants and 60% of non-participants, don’t know how much they need to save annually in order to meet their future retirement goals. There is work to be done on the financial literacy front, too. Just over half of respondents (55%) knew the correct answer to a survey question about compounding interest.2
- Tailored approaches: Employers need to look closely at the generational differences in savings behaviors, the motivations to save and the barriers to savings. The survey found that respondents are holding back for various reasons, including rising healthcare costs (35%) and saving for children’s college funds (20%). For Millennials, 33% said student loans are an obstacle. Offering programs such as Health Savings Accounts, student loan forgiveness and higher education savings plans would relieve pressure for many and enable them to save more.
“Employers have a crucial role to play to help more Americans achieve a financially secure retirement,” Farrington said. “Our research shows that, with or without mandates, employers can meaningfully improve their employees’ prospects for retirement security through thoughtful plan design. But the first step to driving participation is making retirement plans more accessible by providing education and advice that helps employees take full advantage of all that their retirement plan has to offer.”
Natixis is ranked among the world’s largest asset management firms.3 Uniting over 20 specialized investment managers globally (
Not all offerings are available in all jurisdictions.
1 Status of the
2 Natixis posed this question to respondents: Beginning with
3 Cerulli Quantitative Update: Global Markets 2016 ranked
4 Net asset value as of
5 A division of
6 A brand of
7 A subsidiary of
8 A brand of
9 Operated in the