Employees More Stressed Over Immediate Expenses Than Retirement

Concerns about immediate cash needs have overtaken worries about saving for retirement for many employees, according to a new survey conducted by Buck, an integrated HR, pensions and benefits consulting firm.

More than half of employees surveyed said they would prefer a $500 pay increase to a $500 increase in contributions made to a retirement plan, according to Buck’s “Retirement Readiness 2023” report, indicating that day-to-day expenses are more pressing for most employees.

In addition, 79% of employees surveyed said they would like their employer to offer supplemental savings accounts, such as emergency savings, in addition to retirement benefits.

Student loan debt also appears to be top of mind for employees, considering federal loan repayments resumed in October, after a nearly three-year pause on payments during the COVID-19 pandemic. The Buck survey revealed that about 57% of employees said they would like their employer to offer a retirement match for student loan payments.

Student Loans on Tap for 2024?

A positive finding from the report was that out of the 200 HR and benefits professionals surveyed by Buck who administer retirement plans, 57% said they currently offer or plan to offer matching student loan benefits.

According to a recent Corebridge Financial report, 75% of federal student loan borrowers said resuming student debt payments will impact their ability to save for retirement. In fact, 22% said they planned to reduce how much they save for retirement in order to begin making payments in October.

Employers will be able to match student loan payments with plan contributions in 2024, as enabled by the SECURE 2.0 Act of 2022, if the participants elect to pay down student loans instead of contributing to a retirement plan.

Laurie DuChateau, the compliance consulting practice leader at Buck, said in an emailed response that she has seen interest in this SECURE 2.0 provision but has yet to see many clients implement the student loan match provision.

“In part, I suspect [this is] due to administration concerns,” DuChateau says. “If they offer student loan support, it’s outside of the plan. For example, Starbucks is an employer who decided to offer a student loan benefit ahead of payments restarting.”

Starbucks launched its student loan management benefit, through Tuition.io, in September 2022 to aid workers with student loan debt.

Mixed Sentiments Around Retirement Benefits

When thinking about their retirement package as a whole, Buck found that 79% of employees reported being satisfied with their retirement benefits. But while 91% of employers think their retirement benefits stand up to what other companies provide, 61% of employees said they believe they can get a better retirement package with another employer.

“It’s clear from the data that employee attitudes towards their retirement benefits are complex and contain contradictions,” the report stated. “While a majority (79%) are satisfied with their retirement benefits, only 27% are confident that they’ll be able to save enough to cover their expenses in retirement.”

Authors of the report argue this may be because, for many employees, retirement is a concern for the future and is not front and center as they handle day-to-day expenses.

When asked to identify their greatest obstacle to saving for retirement, 35% of employees said cost-of living-expenses were the greatest, 20% said personal debt, 8% said compensation and wages and 7% said college loans.

To improve retirement confidence, both employers and employees agreed that the employer contribution rate is the most important feature to improve. Employees understand the importance of their company’s matching contributions, and 52% indicated they would “definitely increase their contribution” if their employer matched a higher amount.

Tonya Manning, U.S. wealth practice leader and chief wealth actuary at Buck, said in a press release that with today’s financial stressors, it is “critical that plan sponsors regularly assess what policies or strategies are in place to increase retirement plan participation, drive savings rates higher and improve participant investment outcomes.”

The report also showed there is a continued need for education about retirement benefits. Employees reported the most confusing parts of a retirement benefit plan were withdrawal options, investment options and plan fees and expenses. However, only 28% of employers said they think increasing education and communications could help to improve their retirement benefits.

The study found a troublesome 39% of employees are unsure if they contribute the percentage of their annual compensation required to receive the fully company match, so more employer communications and education may be needed.

Buck, a Gallagher company, surveyed 344 employees with retirement benefits from late July through August. The research was supplemented with a survey of 200 HR and benefits professionals.