Retirement plan sponsors take heed: a majority of the people asked said automatic increases in their plan contributions would be a welcome approach to keep them on track to their retirement goals.
That is the big takeaway from recent survey by American United Life Insurance Co., a OneAmerica company. Fifty-five percent of the respondents said they were in favor of automatic annual increases in their contributions, a notion that is just beginning to catch on.
Not surprisingly, others weren’t so sure. Some who were opposed to the notion (19 percent) said they would go so far as to opt out of such increases, while 29 percent haven’t quite made up their minds whether they like the idea or not.
Since many workers don’t get around to figuring out how much they might actually need in retirement until they’re nearly there, passing up the opportunity for an automatic increase might not be such a good idea — especially when other financial goals can booby-trap the path to retirement.
The survey asked respondents to rank those other goals that interfere with their intended plan contributions. Among the top competitors were paying off debt (29 percent); everyday expenses (23 percent); taking care of a family (11 percent); and saving for college (4 percent) — all of them worthy goals themselves.
In a statement, Marsha Whitehead, vice president of marketing for retirement services for the companies of OneAmerica, said, “With non-stop family, health and life events and changing financial obligations over the course of one’s life, saving for retirement can easily fall to the bottom of the priority list. Automatic features can help plan participants easily increase their retirement contributions and not get distracted by other financial matters.”
She pointed out that “autopilot” contributions can help to avoid the effects of inflation and increases in the cost of living. Of course, if participants aren’t willing to surrender control to automatic features, they can’t help.
In recognizing the large percentage of people not quite ready for automatic increases, Whitehead added, “We still have work to do to educate consumers about the importance of calculating how much retirement income they need and contributing enough to their retirement accounts to meet those needs.”
Auto enrollment a slow-go for public plans