Empower: Employers Can Influence Retirement Outcomes via Plan Features
Empower Retirement has released a new white paper titled “Scoring the Progress of Retirement Savers.” It includes survey results from more than 4,000 American workers, ages 18 to 65. The results are encapsulated in Empower’s Retirement Progress Score (RPS)—a numeric estimation of the percentage of working income American households are on track to replace in retirement. The big takeaways: employers can be extremely influential in improving retirement outcomes via the features they offer in their retirement plans, and employers and employees must walk side-by-side on the road to retirement. In other words, employers cannot achieve employees’ retirement goals for them, and employees cannot accomplish these goals alone.
Much of what Empower found in its latest study affirms what we have seen over and over again—that:
- auto features boost participation and savings rates over time,
- employees prefer personalized retirement planning help over one-size-fits-all assistance,
- employees value matching contributions (as long as they understand them), and
- financial advice delivered through a dedicated financial advisor is key to helping workers successfully achieve their retirement goals.
Empower’s blog post about the survey results, written by Empower President Edmund F. Murphy III, includes some potent takeaways for employers:
- First, it’s important for employees to have access to a retirement plan at work. The Empower survey results corroborate a long-held belief that “those who are eligible to participate in a workplace retirement plan have a much higher chance of replacing their working income in retirement than those who do not have access — 79% versus 45%. Nearly 80% of those who have access to an employer-provided plan are confident they are making the most of it to build the retirement income they need.”
- Automatic enrollment and auto-escalation significantly impact retirement income replacement. Auto-enrolled workers are on pace to replace 95% of their income compared to those who manually opt into a plan, who, on average, are projected to replace 84% of their income in retirement. Workers in plans with auto-escalation fare even better: they achieve a median retirement income replacement score of 107% vs. 80% for those in plans without auto-escalation.
For employees, the following success habits make a marked difference:
- Familiarity with the match: Employees in plans where their employers match their contributions based on a certain percentage of pay—essentially offering them “free money” for retirement—and who understand the match 73% (56% of total survey participants) set their deferral rate to get the full match. The message for employers: helping eligible employees to better understand the plan’s matching formula may prompt them to make different savings decisions that set them up to take full advantage of the match.
- Accessing available advice: Bottom line—access to advice is key to helping employees boost their retirement income. Survey respondents who worked with an advisor had a 33% advantage (91% vs. 58%) in projected income replacement vs. those who did not.
As the Empower survey results show, employers have ample tools and resources at their disposal to help employees improve their retirement income replacement rates, and, in addition, boost their overall financial security in their post-working years. Where your plan falls short if at all, you can also work with your retirement plan and provider to implement state-of-the-art solutions. That’s good news. Now, it’s a matter of tapping into the best of those tools and utilizing them to their full advantage to help improve outcomes across the board. When it comes to bolstering retirement income security for today’s workers, that’s an investment employers can feel good about making.