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Data & Research June 21, 2024
By the Numbers: Participant Retirement Saving Strategies & Outcomes
The final PLANADVISER In-Depth installment for this quarter reveals the saving outcomes for participants depending on their strategies.
Reported by Alex Ortolani
Art by Kiki Ljung
In a recent Capital Group survey of defined contribution plan consultants, nine out of 10 said they recommend auto enrollment for plans and 86% encourage auto-escalation to get participants to save.
But participants, of course, also play a role in shaping their saving outcomes. To get a sense of how automation in plan design and participant decisions interact, PLANADVISER dug into some of sister publication PLANSPONSOR’s 2023 participant survey data, which drew on 971 full-and-part-time employees who participate in an employer-sponsored DC plan.
In the first scenario below, the data team considered retirement saving strategies alongside results as measured by how much participants defer as a percent of income. Each row identifies how a participant got to a place of saving less than 2%, or 2% to 3%, and so on up to more than 12%.
Amid the results are three areas that stand out:
- Default rates and employer matching continue to have a large influence on how people save in retirement plans. Most of the respondents used these strategies to set their saving decisions.
- The higher the default or match potential, the more people will save. That is shown by the top two rows, which have the highest percentages across the board—but also show the strongest saving rate potential.
- The data also shows that people who are focused on saving the maximum amount, along with those who set a targeted level of savings, have a better chance of saving more than those using other strategies. For instance, the best chance of saving more than 12% among participants comes from those saving as much as possible by law. That requires, of course, that they’re making enough or have enough to save at those rates.
Participant Retirement Saving Strategy & Results
| <2% | 2% – 3% | 3.1% – 5% | 5.1% – 7% | 7.1% – 10% | 10.1% – 12% | >12% | |
| Took default/recommended savings rate at enrollment | 55.0% | 42.8% | 34.4% | 24.9% | 24.6% | 25.3% | 16.1% |
| Saved enough to receive maximum employer contribution/match | 18.3% | 21.7% | 35.7% | 43.4% | 26.0% | 25.3% | 16.1% |
| Saved maximum amount allowable by law | 5.0% | 7.2% | 8.0% | 13.2% | 14.9% | 20.7% | 41.9% |
| Based amount on a targeted level of savings | 3.3% | 7.8% | 9.8% | 12.2% | 16.7% | 16.1% | 12.9% |
| Followed guidance of spouse/friend/colleague/adviser | 1.7% | 2.8% | 4.9% | 3.9% | 2.6% | 4.6% | 9.7% |
| Started contributing at lower percentage, but rate automatically increased to current level | 5.0% | 6.7% | 4.5% | 1.0% | 3.5% | 6.9% | 3.2% |
| Don’t know / Unsure | 11.7% | 11.1% | 2.7% | 1.5% | 1.8% | 1.1% | 0.0% |
Our second set of data considers how to best reach these participants to relay the details of their plan.
This data shows the preferred method of communication as compared to how much people defer into their workplace savings account.
A few standout statistics include:
- The need for one-on-one financial coaching and advice is not being oversold by the retirement plan industry: Meeting with an adviser for 30 minutes has the strongest interest from participants.
- Short, printed brochures are surprisingly influential, though notably with those who are saving less. There certainly seems to be a need for continued off-line communication or perhaps more mobile solutions for people who may not be at a computer during the work day.
- Finally, it’s interesting to note that interactive, online libraries are more popular for those saving at higher levels.
Savings Rate by Preferred Method of Communication
| <2% | 2% – 3% | 3.1% – 5% | 5.1% – 7% | 7.1% – 10% | 10.1% – 12% | >12% | |
| Read short, printed brochure delivered to home by mail | 28.3% | 21.1% | 18.3% | 16.1% | 17.5% | 9.2% | 17.7% |
| Participate in 90-minute, instructor-led group seminar | 6.7% | 12.2% | 13.4% | 12.2% | 12.3% | 13.8% | 11.3% |
| Review periodic newsletter via email with links to information/actions | 11.7% | 11.7% | 14.3% | 10.7% | 11.4% | 12.6% | 24.2% |
| Browse interactive, online library allowing for self-paced learning | 18.3% | 15.0% | 12.5% | 20.0% | 15.8% | 18.4% | 9.7% |
| Meet one-on-one with a financial adviser for 30 minutes | 30.0% | 24.4% | 29.9% | 30.2% | 34.2% | 32.2% | 25.8% |
| Listen to an informative 30-minute podcast | 5.0% | 15.6% | 11.6% | 10.7% | 8.8% | 13.8% | 11.3% |
The data above is drawn from PLANSPONSOR’s 10th annual Participant Survey performed in partnership with first-party data company Dynata and fielded by Qualtrics online survey platform, September 29 through October 12, 2023.
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Participant Data and the Race for Ownership |
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Financial Wellness Moves From “Nice to Have” to Table Stakes |
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Recordkeepers and Participants: An Evolving Relationship |
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