Auto-Enrollment Gains in Popularity Among Retirement Plan Participants

Automatic enrollment, one of many retirement saving tactics expected to increase in frequency due to the passage of the SECURE 2.0 Act of 2022, are favored at an all-time high, new data from American Century shows.

Among retirement plan participants surveyed in late 2022, 71% agreed employers should auto-enroll workers at a 10% default, compared with 47% in 2021 and 46% in 2020, according to the American Century Investments 10th Annual Retirement Savers Survey: Reflection, Risk and Resolve.

While survey respondents in 2022 were not asked their opinion of lower deferral rates in 2022, in 2021, 68% agreed plan sponsors should auto-enroll participants at 6% default, and 70% agreed in 2020.

Most retirement plan participants consider themselves average savers, grading their retirement savings efforts at a 3.5 on average, or a C+ in 2022, compared to a 3.6 average or B- in 2021, according to the survey.

“Men, those with incomes of $100K or more, and those with assets of $500K or more are most likely to give themselves an A or B,” the report stated.

Roughly 80% of participants want some degree of employer encouragement to help them save for retirement, with more than four out of 10 expressing a preference for either a “kick in the pants or a “strong nudge,” data showed.  

• A kick in the pants from employers to save more is favored by 14%
• A strong nudge from a plan sponsor is preferred by 32%
• A slight nudge is best for 35%; and
• Leave me alone is preferred by 19%

Baby Boomers (born 1946 through 1964) are more likely than Millennials (born 1980 through 1994) and Gen Xers (born 1965 through 1979) to want to be left alone, while 85% of Millennials want at least a slight nudge, the research found. 

Employers may be able to provide greater support for employees to save more at a time when the American Century research found workers are feeling optimistic about retirement, expecting a better standard of living in retirement.

Responses to a question about respondents’ expected standard of living in retirement were more mixed, with a plurality (42%) expecting their standard of living to be much worse than it is now. The percentage of respondents expecting an increased standard of living, however, did grow to 33% in 2022 from 29% in 2021, the data showed.

“Half of Millennials expect it to be better, driving the increase,” the survey stated.

A press release with the survey called 2022 optimistic, with respondents’ outlook ranking fourth among the 10 surveys the company has conducted; only 2017, 2018 and 2021 ranked higher.

The optimism could be reflecting confidence in the features and products prevalently provided by plan sponsors to employees for retirement, like target-date funds, and greater prevalence of auto-enrollment to address the needs of plan participants, stated Glenn Dial, a senior retirement strategist at American Century Investments.   

In a longer-term trend, participant interest in target-date funds increased to 72% in 2021 from 55% in 2013, the first year the survey was conducted.

American Century conducted the participant survey between December 7, 2022, and January 4, 2023. The survey included 1,509 full-time workers between 25 and 65 saving through their employer’s retirement plan.