A new report by the Investment Company Institute found that of the workers who have a desire to save for retirement, three-quarters had access to a pension plan through their own or their spouse’s employer, and 93 percent of those with access participated.
Younger and lower-income workers are the least likely to save for retirement because they are trying to save for an education, buy a house or fund some other purchase. Some want to have cash on hand in case of an emergency, according to “Who Gets Retirement Plans and Why, 2010.” Research has shown that most workers will not start saving for retirement until later in their working careers.
Older and higher-earning workers are more likely to save primarily for retirement, so they appreciate being able to put money away in an employer-sponsored benefits plan. In 2010, 50 percent of private-sector wage and salary workers aged 21 to 64 reported that their employers sponsored retirement plans.
The report also found that retirement plans at work are not randomly distributed throughout the workforce. Employees who have retirement plans at work are more likely to be older, have higher earnings and work full-time. Thirty-nine percent of workers age 21 to 29 worked for employers that sponsored retirement plans in 2010, compared to 57 percent of workers age 55 to 64. Only 14 percent of workers who earned $14,000 a year or less worked for employers with retirement plans. That compares to 74 percent of workers who make $60,000 or more. The report concluded that worker demand plays a huge role in determining whether or not a company sponsors a retirement plan.
It also found that it doesn’t matter what size the company is, if it offers a retirement plan, about 80 percent of employees will participate. As a group, the characteristics of small-firm employees differ substantially from large-firm employees. Nevertheless, workers at small firms that sponsor plans are very similar to workers at large firms that sponsor plans and workers at small firms that do not sponsor plans are very similar to workers at large firms that do not sponsor plans.
There are two potential explanations for why small firms are less likely to sponsor retirement plans: small firms incur higher per-employee administrative costs than large firms, and small-firm employees do not value retirement benefits as highly as large-firm employees.