Employees across the United States are willing to save more for retirement and report that there is room in their budgets to do so. However, many defined contribution (DC) investors are hampered by an “action gap” caused by the disconnect between understanding what is important and knowing how to take action, according to a survey of plan participants released today by State Street Global Advisors (SSgA), the asset management business of State Street Corporation (NYSE:STT).
Seventy-eight percent of survey respondents reported that they know it is important to determine how much to save for a secure retirement but only 33 percent claim to have the knowledge to determine that amount. The majority, 83 percent, of respondents said they could cut their household budget by at least five percent to save more--including 64 percent that said they could reduce their budget by 10 percent or more. In addition, 52 percent of respondents would be willing to increase their savings rate to as high as 10 percent if their employer automatically increased their savings rate by one percent each year.
The bi-annual SSgA Defined Contribution Investor Survey, conducted jointly with the Boston Research Group, surveyed more than 1,000 401(k), 403(b), 457 and profit sharing plan participants 1 to identify their behaviors and perceptions about saving and investing. The survey uncovered three findings that are especially important for helping employers and employees improve retirement outcomes for DC investors:
- Savings willingness and elasticity, or flexibility in budgets to save more, are significant.
- Participants display a significant “Action Gap” between understanding the need to take action and possessing the knowledge to do so.
- Simplicity and repetition are key to engaging employees to help close the “Action Gap.”
“The survey uncovered some very encouraging findings, the most striking of which was that the majority of DC investors have the flexibility in their budgets to support greater retirement savings,” said Kristi Mitchem, senior managing director and head of Global Defined Contribution for SSgA. “Many are also open to automatic savings increases up to 10 and 15 percent, which is very promising news for employers. We encourage employers to test savings elasticity with their employees and to encourage higher savings rates by implementing savings challenges or by automatically increasing the savings default rate.”
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