9. Get with the program…
While not all plan sponsors are eager to jump in and guide employees to a better retirement, their employees think they should.
In fact, 76 percent, according to the survey, feel their employer has at least some level of responsibility for helping employees save for retirement.
The good news is that more employers do feel some responsibility for employee financial wellness—from 74 percent in 2015 to 82 percent in JP Morgan’s 2017 survey.
But employers who haven’t yet taken a more active role, or who haven’t ridden herd on their plan advisors to make sure they’re doing all they should, might need to make some changes.
8. But don’t go too far.
Some employees, the report says, expect their bosses to do all the work.
The study cites one employee response that says, “If I could push an easy button … and completely hand over my retirement planning and investing to a financial professional, and not have to think about it at all, I would.”
In addition, while employees expect employers to recommend that they save more, some of them get quite miffed at the idea that their employer might actually set the percentage for deductions.
But that's changing -- 19 percent now say the employer should decide the employee’s savings rate (compared with 10 percent in 2016).
7. Remember that participants can misinterpret retirement plan information.
The survey found that a surprising 30 percent of workers see the percentage of salary matched—whether it’s 3, 6, 10 percent or more—as a recommendation for the size of the contribution they should make.
Find a way to convey to employees that that is not the case.
6. There’s always someone…
Four percent of respondents to the survey think that the recommended amount you so carefully came up with is the amount you think they can save.
Considering how low the bar is set on many employer matches in retirement plans, that’s a pretty easy goal—and one that won’t help them.
Talk to your employees and find out exactly what they think those numbers are for—and then reach out to all of them to make sure you set them straight.
5. Seize the chance to raise the bar.
A substantial 21 percent say they set their contribution to “what my employer will match.”
If this is the case in your company, it’s time to reset how the employer match works—raising the amount employees have to contribute, for instance, in order to get the full match.
4. Show them the numbers.
Lots of people just can’t translate those account balances into a monthly retirement income.
Choose educational materials that will do it for them, so that they know just how much they’ll get at retirement from a $10,000 balance today.
3. Give them a push.
Materials that show them how much more they’ll need to save to have a balance that will actually support them in retirement, and what contribution percentage will get them there, will go a long way toward helping them save more and save it now.
In fact, 36 percent of respondents said they’d find it helpful to know how much they should be contributing from each check and how much more they need to save.
2. Then give them another.
Only 11 percent of employees said they’d be motivated by an employer sending out reminders that they’re not meeting retirement goals, but it’s definitely an option to consider.
The immediacy of the reminder could make the difference, since the report said, “Our findings suggest that the more specific and immediately actionable the savings projections are, the more effective they will be.”
1. Don’t hold back.
Automated features such as auto-enrollment and auto-escalation are recommended, but lots of employers don’t want to do that -- they’re afraid they’ll get pushback from employees.
But the opposite is true, finds the study. While 25 percent of sponsors refrain from auto-enrollment, 82 percent of participants are either in favor of or neutral toward having that decision taken out of their hands.
And while 20 percent of sponsors hold back from auto-escalation, there, too, 80 percent of participants are okay with the idea or at least don’t hate it.
Keep in mind that 95 percent of those who were auto-enrolled are happy about it, and 97 percent of those who were auto-escalated are pleased with the results (just 6 percent cut back the contribution rate after increase).
Studies show that while people might be saving more for retirement, they’re not saving enough—and many aren’t saving at all. Reasons for this behavior vary with demographics. But the fact remains that more people seem to need more help when preparing for retirement.
Enter the 2018 Defined Contribution Plan Participant Survey from JP Morgan, which finds that, among other things, employees take to heart plan recommendations that are meant only as general guidance, not instructions.
The survey, which queried nearly 1,300 participants, found disconnects and miscommunications between employee participants and employer plan sponsors.
Some problems arise out of ignorance on the part of participants; some out of a lack of confidence and some on simple misunderstandings or a misplaced streak of independence. Some arise out of fear.
While people really want to save more—30 percent say they’re committed to saving as much as they can—a grim 12 percent say they’ll wait till they retire and then figure out how to live on what they’ve managed to save.
As the report points out, neither of those is actually a plan for retirement.
While participants do seem optimistic on their chances for a comfortable retirement, nearly half feel they won’t be able to retire when they want. The JP Morgan report looked at several areas where participants fail to achieve their goals and why, and made recommendations to employers on how to try to fix the situation.
Look at the slides above for 9 of their suggestions.