There is considerable debate about whether the United States faces a retirement crisis and the possible extent of it.
Lori Lucas
President & CEO, Employee Benefit Research Institute
Research by the Employee Benefit Research Institute (EBRI) and others has shown that many workers will face a shortfall in the amount they’ve saved for retirement — and that this shortfall is highly dependent upon the availability of a workplace retirement savings program.
EBRI research shows that workers ages 35-39 with no access to a workplace Defined Contribution (DC) plan have a deficit more than five times higher than those with at least 20 years of access to such a plan.
Yet, according to the Retirement Confidence Survey, just 75% of employed workers report being offered a DC retirement savings plan by their current employer. Those with out a DC plan also tend to have lower household income — one-third earn less than $35,000 per year, whereas just 5% of those with a DC plan have earnings this low. They are also less likely to have high savings levels, to have ever saved for retirement, or to have calculated how much they need for retirement.
In addition, workers who say they are confident about retirement are far more likely to be satisfied with the fund or investment options available to them in their workplace savings plan as well as the tools and resources available that help them determine how much to save and how to generate a guaranteed stream of income in retirement than those who are not confident. Overall, 89% of those who say they are confident about their retirement are satisfied with their workplace retirement plan, compared with 48% of those not confident.
Furthermore, more than three-quarters of very confident workers engaged in some way with their retirement plan in the past year, compared with half of those who said they were not confident about retirement. And the number-one way that very confident workers engaged with their plan was by increasing the amount they contributed to it.
The proliferation of DC plans with automatic enrollment, automatic contribution escalation, and default investment options such as target-date funds over the past decade and a half have done much to bring workers into established DC plans. However, such features don’t solve the fundamental issue of access. Such features also don’t fully address engagement. Interestingly, in the EBRI Retiree Reflections Survey, current retirees overwhelmingly said they wished they’d saved more and planned earlier for retirement. Employers and workplace savings programs can be key in supporting this goal.