Even though employees are increasingly participating in 401(k) plans, 85% of employers say they are not satisfied with employee savings rates. This finding comes from the latest study on retirement and financial wellbeing trends by Aon Hewitt. The firm also revealed that 90% of employers are concerned about their employees’ understanding of how much they need to save in order to meet their retirement goals. As a result, 87% of employers plan to make changes in order to solve this issue.
“Employers are making retirement readiness one of the important parts of their financial wellbeing strategy by offering tools and modelers to help workers understand, realistically, how much they’re likely to need in order to retire,” says Rob Austin, director of retirement research at Aon Hewitt. “Some of these tools take it a step further and provide education on what specific actions workers can take to help close the savings gap and [to] help workers understand that even small changes, such as increasing 401(k) contributions by just two percentage points can impact their long-term savings outlook.”
More and more employers are also beginning to see retirement as just one piece of the overall financial wellness puzzle, and are moving to fill in the blanks by addressing other aspects of their employees’ financial wellbeing. According to the survey, 92% of companies are likely to focus on financial wellbeing beyond retirement by offering benefits to aid in managing student loan debt, day-to-day budgeting, and even physical and emotional wellbeing.
Fifty-eight percent of employers already offer a tool that aims to improve one aspect of financial wellbeing. Aon Hewitt projects that rate will jump to 84%.
“Financial wellbeing programs have moved from being something that a few leading-edge companies were offering to a more mainstream strategy,” explains Austin. “Employers realize that offering programs that address the overall wellbeing of their workers can solve for myriad challenges that impact people’s work lives and productivity, including their physical and emotional health, financial stressors and long-term retirement savings.”
But despite the troubling statistics behind workers’ retirement readiness and financial wellbeing, plan sponsors can keep making the most out of a tool in their arsenal which has already generated some positive results: automation. A separate Aon Hewitt report found that more than half of all plans with automatic enrollment default workers at or above the company match threshold. Employers are also utilizing automatic contribution escalation features, while enrolling or backsweeping workers who may not have been previously enrolled in the 401(k) plan.
“Employers realize that automatic 401(k) features can be very effective when it comes to increasing participation in the plan,” says Austin. “Now they are taking an automation 2.0 approach to make it easier for workers to save more and to invest better.”
Aon Hewitt’s “2017 Hot Topics in Retirement & Financial Wellbeing” surveyed more than 250 U.S. employers representing nearly 9 million workers to determine their priorities and likely changes when it comes to retirement benefits.