Data & Research January 24, 2007

Globally U.S. is Tops in Retirement Savings

Of 11 countries surveyed, U.S. workers save the most, according to a recent survey by AXA Equitable that found U.S. workers save on average $696 a month for retirement.

Reported by

Rebecca Moore

Further, eight of 10 working Americans have already started saving for retirement, with the average age to begin saving of 30.

The U.S. workers’ contributions are more than double the amount saved by workers in Germany, Italy and France, and nearly 10 times the amount saved by workers in China.

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Meanwhile, 95% of working Americans surveyed and 86% of retirees agreed that Social Security is in trouble, according to the news release. In fact, one-third of the U.S. population under age 50 said they did not think our current system will be around when they reach age 75. However, 77% of low-income retirees said they rely on Social Security as a major income source. Contrarily, Hong Kong, China and Spain are bullish on their country’s pension system (nearly 90% of Chinese said they believe in their current system).

In addition, 54% of Americans said they anticipate additional retirement reform in the next decade, including an increase in the retirement age and a reduction in public pension benefits. Nearly three-quarters of U.S. workers said they think public pension benefits will be reduced as a result of reforms.

Other key survey findings from U.S. respondents included:

Out of 11 countries surveyed, U.S. retiree respondents were found to be the happiest, travel the most, receive the highest income, save the most for retirement, have the highest percentage of home ownership and believe they have the best financial situation.
Most retirees surveyed started their retirement at age 58.
One-quarter of middle-income retirees surveyed reported they were forced by their employer to retire early.
The age people expect to retire is increasing. Working people surveyed said they expect to retire at age 64, versus age 62 in last year’s survey.

A total of 6,915 people between 25 and 75 years old were interviewed in Australia, Canada, China, France, Germany, Hong Kong, Japan, Italy, Spain, the United Kingdom and the United States. The main sample from the U.S. included 840 people, 421 of whom were working and 419 were retired.

In Practice January 24, 2007

Auto Catch-Ups on Fidelity Drawing Board

Fidelity Investments is testing a new feature under which older participants already contributing at or close to the maximum to their 401(k) plans can "automatically" catch up.

Reported by

Fred Schneyer

Despite continued educational campaigns to motivate more workers to take advantage of the provision, clients were seeing a lax 9.8% take-up rate for the “catch-up” provision, which allows for employees age 50 and older to put another $5,000 a year into their 401(k) plan (in addition to the regular limit of $15,500). “That’s a number that should be dramatically higher,” James Cornell, Fidelity Senior Vice President of employer marketing said.

Cornell said the test started about nine months ago with about 25 clients – partly at the request of activist plan sponsors who continued to struggle with how to get older participants to take advantage of the catch up provision. “These are definitely the more aggressive clients we’ve got,” Cornell told PLANADVISER.com.

He said the “auto catch-up” program was being implemented differently by different clients, including a difference in how quickly participants were to be increased to the legal ceiling.

The initial effort is largely focused on highly compensated employees (HCE) already contributing at or close to the legal limit. “We want to move the needle (on the take-up rate) for all participants, not just HCEs,” Cornell said. “But they may be the first beneficiaries of this.”

Cornell said Fidelity intends to keep the test going until the spring and then meet with clients to decide how to proceed from there. The company would like to eventually roll out the “auto catch-up” provision to all its 401(k) clients, he said. Clients were reporting strong acceptance of the move by participants with few opting out. “It’s a very, very powerful mover of participant behavior,” according to Cornell.