It’s hardly news that most American workers are not confident about their ability to retire comfortably or feel that they are saving enough. Traditional financial education has failed and people tend not to act even when they know they should. Workers that have retirement plans at work are 17 times more likely to participate. A JP Morgan survey with over 1000 DC plan participants that they are open to and even welcome auto features that greatly improve their chances to retire comfortably but some employers are still reluctant to institute them fearing push back.
Though billions have been spent on employee education not to mention hundreds of thousands of hours, the results are dismal. Employees have competing demands and are hampered by a lack of knowledge and ability to act properly so they end up doing nothing. Though 81% of participants surveyed in the JP Morgan report are interested in financial planning, just 48% have a plan. Overall, 68% know they are not saving enough and another 48% know that they are not spending enough time planning for their financial future.
Auto features which have swept the DC industry like auto-enrollment, re-enrollment, auto escalation and the use of target date funds are making a huge impact on retirement readiness yet some plan sponsors still resist fearing that employees will push back or because they don’t want to appear to be paternalistic. But the JP Morgan shows a very different picture:
- Auto enrollment
- 1% opt out
- 96% are satisfied
- 31% would not have otherwise joined the plan
- Auto-escalation
- 97% satisfied
- 15% would not have increased deferrals otherwise
- Target Date Funds – 90% find them appealing
Results are even more dramatic for workers under 30 and even though that consider themselves active savers favor these features.
Time to stop wasting time on education hoping workers do the right thing on their own while instituting auto features under the Ideal Plan and spending resources on one/one meetings and financial wellness programs.
