More than one-third of Americans who contribute to an employer-sponsored retirement plan have never increased the percentage of their salary they contribute to their company’s plan, according to a survey.
The TIAA-CREF survey finds that an additional 26% of workers have not increased their contribution in more than one year.
Fifty-three percent of employees with company retirement plans were not automatically enrolled in their companies’ plans. Those not automatically enrolled lost precious time saving for retirement, with 37% of respondents who were not automatically enrolled in a plan reporting that they waited six months or longer to enrol and 24% waiting a year or more.
The survey also finds that 57% of workers didn’t increase their plan contribution after their last raise. The most common reason cited for not increasing contributions after a raise was an immediate need to pay expenses.
One-quarter of respondents say they did not increase their contributions after their last raise because they were already contributing the maximum amount to their retirement plan, although men (33%) were nearly twice as likely as women (17%) to be contributing the maximum amount allowed.
Millennials were more likely than any other age group to increase savings after a raise (52%), and of those millennials who didn’t increase savings after a raise, 23% didn’t do so because they were already contributing the maximum amount allowed.
“Plan sponsors should have ongoing interactions with employees over the course of their careers around three critical actions: enrol in the plan, increase contributions every year and check asset allocations every year to rebalance if necessary,” says Teresa Hassara, executive vice-president of TIAA-CREF’s institutional business. “Auto-enrollment and auto-escalation options offer great benefits to overcoming employee inertia around retirement planning, but they are not universal, and they are not a substitute for employee engagement.”
The survey finds that many respondents aren’t taking the steps necessary to make sure they have the right investments at each stage of their lives. One-quarter of workers have never made changes to how their money is invested, and an additional 28% have not made changes to how their money is invested in more than one year.
Millennials again were significantly more likely to have changed how their money was invested in the past year compared to those 35 years or older (59% versus 42%).
Thirty-four percent of those 55 and older say they’ve never made a change to the way their money is invested, which means they are less likely to have taken the steps necessary to transition from saving for retirement to creating income to last for a lifetime.
“Plan sponsors should be proactively looking for opportunities to engage directly with employees about their retirement savings, especially during pivotal times such as benefits enrollment season and after an employee receives a raise,” Hassara explains. “Reaching employees at the right time with the right messaging can have a profound effect on retirement readiness.”
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