Most Participants Want a Nudge or Kick in the Pants!


There is a distinct disconnect between what many plan sponsors think employees want and what those participants actually want when it comes to planning and saving for retirement. In fact, a recent American Century survey found 80 percent of workers want at least a “slight nudge” of encouragement to save for retirement, while 15 percent actually want a “kick in the pants.” Yet, a third of employers believe their participants want to be left alone.

Most plan participants understand the importance of saving for retirement, according to the survey. However, those same employees agree that more immediate financial concerns, plus fears about making investment mistakes and too many options, often keep them from adequately preparing for the future.

Overall, participants give themselves a C+ grade for their retirement savings efforts, but nearly 90 percent of them said they did not know what they were doing when picking their investment options.

However, there is some good news. Both younger and more mature employees say they are more likely to save if the process is easy and painless.

Easy Kick-In-The-Pants Tools

Auto Enrollment

Definition: All eligible employees are automatically enrolled into a qualified default investment alternative (QDIA) at a pre-selected deferral/contribution rate. Employees can always opt out, change their investment selection, and/or change their contribution rate.

Benefits:

• Increases participation and helps nudge employees toward better retirement outcomes
• Eliminates complicated decision making around amount to save and where to save it
• Helps employers as well! (Removes potential non-discrimination issues.)

Auto Escalation

Definition: Increases participant contribution rates annually by a set increment (used in conjunction with Auto Enrollment). As an example: 1% per year to a maximum contribution level of 10%.

Benefits:
• Accelerates savings rates
• Maximizes the number of employees eligible for the full match

A large majority of participants also said the more information the better. While they may not know the exact terminology, participants do know they need annual help and worksheets or tools that can help better plan for retirement.

As a plan sponsor, consider meeting this need with annual reviews, retirement accumulation projections, and projection calculators. Participants want employers to help them save for retirement. In fact, they want a serious push. Don’t be afraid to step in and offer guidance, auto plan options, and ongoing education.