Participants Favor Automatic Annual Increase

“With non-stop family, health and life events and changing financial obligations over the course of one’s life, saving for retirement can easily fall to the bottom of the priority list,” says Marsha Whitehead, vice president of retirement services marketing for OneAmerica, the parent company of American United Life Insurance, which recently published a survey report on automatic plan design features. “Automatic features can help plan participants easily increase their retirement contributions and not get distracted by other financial matters.”

The survey asked workplace retirement investors to rank the financial priorities that compete most with their retirement account contributions. According to the survey, the four most pressing concerns are paying off debt (29%), meeting day-to-day expenses (23%), taking care of family (11%) and saving for college (4%). The research suggests many plan sponsors cite these factors in their resistance to auto-feature implementation—despite a growing body of research highlighting participants’ favorable attitudes towards automatic plan design tools (see “The Plan Sponsors Auto-Feature Paradox”).

About three in 10 (29%) respondents said they are unsure how they feel about auto-increase, also known as auto-escalation, and 19% said they would opt out of the feature. “We still have work to do to educate consumers about the importance of calculating how much retirement income they need and contributing enough to their retirement accounts to meet those needs,” Whitehead adds.

Automatically increasing the contribution amount each year helps address inflation and cost-of-living increases, she says. “When auto-increase is coupled with educational tools and materials, a feature like this can really help participants stay focused and disciplined in planning and saving for retirement,” Whitehead suggests.

A summary of OneAmerica’s participant survey can be viewed here.