It’s one thing to personally worry about building a big enough nest egg for retirement, but things really start to get prickly when studies like this show just how pessimistic employers are about worker’s retirement savings.
A paltry 4 per cent of 500 businesses surveyed by research firm Aon Hewitt said they were confident that their employers would have enough savings to sustain themselves in retirement.
It seems a lot can change in a year.
The same survey in 2011 found seven times as many companies – 30 per cent – were totally confident in their workers’ retirement prospects.
“The stark drop in the confidence of employers is troubling,” said Pamela Hess, director of retirement research at Aon Hewitt. “We’ve known for a while that workers weren’t saving enough for retirement, but it seems that with continued tough economic times, employers are realising just how dire the situation has become for much of their workforce.” (See 5 bad habits that’ll wreck your retirement.)
Why the sudden drop?
This year, 90 per cent of plan sponsors said they thought workers weren’t taking accountability for their own retirement planning.
Per Your Money contributor Kimberly Palmer: “A study by 401k.org shows that on average, Americans with 401(k)s contribute between 5.5 and 7 per cent of their pre-tax salaries into those accounts—far less than most people need to replace the recommended 80 per cent of their working salaries during retirement.”
The good news is that businesses are taking proactive steps to help their workers navigate the retirement planning process.
Nearly half said they will help employers retire with adequate savings and 60 per cent said they’d push workers to fully understand the benefits and resources at their fingertips. The proof is in the numbers.
Since 2006, twice as many employers are automatically enrolling employees into a defined contribution plan.
That’s not to say it’s a great idea to put your retirement planning on auto-pilot or let your human resources decide how to invest your savings. In fact, Aon Hewitt found that of workers who are subject to automatic enrollment, most (63 per cent) aren’t saving enough to get the full employer match.
“Automatic enrollment alone isn’t enough to get workers where they need to be,” said Hess. “Plan sponsors need to step it up by encouraging employees to save at a higher rate. Adding features such as contribution escalation to get workers saving at least at the employer match level—or ideally even more—is key to helping them meet their savings goals.”
Our advice? Build your nest egg with your employer’s help, but don’t take your hands off the wheel for a second if you want to secure the best plan for your future.
Hidden fees are a huge money suck in retirement plans and have been quietly chipping away at Americans’ savings for decades due to poor regulation.