Workers Regret Not Saving More for Retirement: Study

Ed Yardeni: What the New Tax Law Will, and Wont, Do for the Economy

IRS Advice on Property Tax Prepayment Causes Widespread Confusion

How Trump’s Tax Act Could Affect Annuity Issuers

Some 90% of retirement plan participants in American Century Investments’ recently released fifth annual plan participant study expressed regret about their retirement savings habits.

The number of pre-retirees in the 55-to-65 age group who reported having a great deal of regret rose by 5% in the past two years, the study found.

“Not saving for retirement was cited as the most common personal regret — more than not being a better person or having better personal relationships,” American Century Investments vice president for client marketing Diane Gallagher said in a statement.

“People recognize the importance of saving but lack that general direction or push to get started.”

Washington, D.C.-based Mathew Greenwald and Associates conducted a survey during the third quarter among 1,500 full-time workers between ages 25 and 65 who were participating in their employer’s retirement plan, intended to retire at some point and were not working for the government.

Study participants said the first five years of their working lives was the period of time for which they had the most regret, with more than 90% saying it would be “at least somewhat important to tell their younger selves to save more.”

But 75% acknowledged that their early-career self would be only “somewhat or very likely” to accept that advice.

Participants cited several common barriers to saving: not earning enough, having debts to pay off and incurring unexpected expenses.

Asked to grade how well they did in putting away money for retirement, given their resources and circumstances, study participants gave themselves a ‘C.’

“We continue to see this disconnect in people knowing what they ‘should do’ against what they actually do with respect to saving,” Gallagher said. “Although participants recognize that responsibility and gravity, they still struggle with overcoming inertia to move forward.”

Employers’ Influence

The study results underscored how important employers’ influence on participants saving for retirement is.

Survey respondents gave their employers a ‘B-’ for the job they had done providing a retirement plan that offered the opportunity to save, invest and accumulate retirement savings. Nearly half said their employer’s role was critical in getting them to save.

The survey posed two hypotheticals. Offered the option of receiving either a 100% match on their 3%-of-salary retirement plan contributions or a 3% higher salary, which would participants take? Seventy-seven percent of pre-retirees and 75% of younger respondents said they would take the match.

When asked about substituting 6% for 3%, 78% of pre-retirees and 69% of the others chose the match.

Some four-fifths of participants said they considered the defined contribution plan one of the most important benefits, and two out of three said they felt positive about a company that offered auto-enrollment, automatic increases and target-date funds.

Asked about state-run retirement plans in which employers automatically enroll employees if they do not offer a plan of their own, 57% of pre-retirees and 58% of younger participants said they would prefer an employer-run plan.

“The idea that employees would accept a higher match over higher salary may have implications for plan sponsors and their consultants in structuring compensation and benefit programs,” Gallagher said. “It is certainly a perspective that is worth examining within a particular organization.”

The research showed how important automatic plan features are to participants, who welcomed defaults around saving rates and investments to help them start to save.

The vast majority of respondents agreed that the company for which they worked should offer automatic features, with 75% believing automatic enrollment at 6% was something the company should do and more than 60% saying it should be implemented retroactively.

Eighty percent of participants showed at least some interest in a regular, incremental automatic increase, and a similar percentage supported plan investment re-enrollment into target-date solutions.

Recent research showed that a growing number of defined contribution plans offered by large employers are adding auto-enrollment, auto-escalation of contributions and Roth options as enhancements to their plans.

— Check out There’s a Hole in the Retirement Bucket Strategy on ThinkAdvisor.

Laurence Kotlikoff and Jane Bryant Quinn talk to ThinkAdvisor about the future of Social Security and Medicare as a premium…

You are signed up!

Your resource for news, research and analysis to help you deliver more effective outcomes to your clients. width:300px!important;max-height:36px; Financial Education Resource Center Financial Education Resource Center

ThinkAdvisor and the College for Financial Planning have partnered to bring you a series of helpful educational tools that you can use to take your career to the next level. width:300px!important;max-height:36px; ThinkAdvisor TechCenter

ThinkAdvisor’s TechCenter is an educational resource designed to give you a competitive edge by keeping you abreast of new tech innovations and need-to-know information that can be applied to your business. padding: 0px;width: inherit; ETF & Smart Beta Research ETF & Smart Beta Research

A survey of advisors nationwide reveals how the use of ETFs is expanding and what factors are likely to further support this trend. Resources Exploring Independence: An Overview of the Registered Investment Advisor Model

Why more advisors are choosing to become RIAs

Reviewing this paper and incorporating the steps included into your 2018 marketing plan will enable you to be effective and take advantage of the huge…

Financial firms are failing to manage text messaging risk in the workplace. This guide explores how firms are exposed, the challenges of compliance and steps…

Join this webcast to see how Trisha Qualy, Director of Wealth Management at AdvisorNet Financial, took client assets from $100 million to $1.3 billion in…

Join this complimentary webcast to learn innovative strategies that have proven effective in containing rising health costs.

Join this conversation as a panel of experts provides tips and best practices to optimize your tech resources for business growth.