Retirement Savings Concerns Includes Saving Regrets
Retirement savings concerns include regrets among Americans for not saving enough for retirement. It turns out, most Americans know they’re not doing so great when it comes to retirement savings, which contributes to their Retirement savings concerns. According to a recent Harris Poll of 1,000 American adults commissioned by TD Ameritrade, 75% of Americans understand they’re making a financial mistake. Their biggest gaffe? Not using their retirement plan at work to set aside savings for retirement, the study found.
A report on retirement security from the Government Accountability Office (GAO) released earlier this year found that 48% of older households had no retirement savings (at least not in a defined contribution plan or within an IRA structure).
Intellectually, most workers know that their workplace retirement plan is a great way — possibly one of the best ways — to bulk up their retirement savings. However, as people get older, they also need to prioritize retirement savings. If they don’t, and they don’t use their employer-sponsored retirement plan to help them build their retirement account, workers will likely have retirement savings concerns in the form of regret, according to Wende Rhodes, vice president of TD Ameritrade.
That said, workers are not forsaking workplace retirement savings plans entirely. Far from it. Americans have $5.7 trillion invested in employer-sponsored 401(k) plans, according to the Investment Company Institute (ICI). That’s about 20% of the retirement assets in the U.S. About 47% of workers aged 25 to 34 have access to a workplace retirement plan like a 401(k), according to a recent academic report from Stanford University. However, Americans aren’t using employer-sponsored retirement savings plans to their fullest extent which contributes to retirement savings concerns.
And even fewer are putting enough money aside in retirement savings to “max” out their contributions. The maximum 401(k) contribution limit for 2019 is $19,000; workers age 50 and older can make an additional catch-up contribution of $6,000. At the very least, employers should encourage workers to save enough in their retirement savings plan to take full advantage of company matching contributions when applicable. Indeed, not saving enough in their workplace retirement savings plan to get the match ranked third highest on respondents’ list of retirement savings concerns regrets, TD Ameritrade found.
As far as other financial mistakes go, Millennials (ages 22 to 37) say their biggest error isn’t short-changing their retirement savings. It’s their lack of emergency savings, according to the TD Ameritrade study. A low credit score comes in a close second. According to Rhodes, it makes sense that Millennials would be more focused on near-term financial goals instead of longer-term savings goals like retirement. As they get older, their priorities will shift to other retirement savings concerns, she added.
Plan sponsors should continue to emphasize the importance of prioritizing retirement savings for employees of all ages. The earlier workers embrace the opportunity, the fewer regrets they are likely to have later in life. The good news is, Americans are aware that they need to do more when it comes to beef up their retirement savings. Now, workers need to recognize that they need to take action. Rather than lamenting their mistakes and dwelling on what they haven’t done, they should focus on what they can do better — building their retirement savings as much as they can from whatever point they’re at. Two proactive steps plan sponsors can take are encouraging employees to save at least enough to get the company match, which should reduce retirement savings concerns; and, implementing automatic annual contribution increases into their plan design.