Participants October 4, 2021

What Makes a DC Plan Participant a ‘Super Saver’?

Principal says almost anyone can mimic super savers’ behavior and suggests ways defined contribution retirement plan sponsors can help.

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Principal’s “Super Saver” research reveals that it isn’t just older generations or people making the highest salaries who are maximizing their retirement savings.

Principal conducted the research in July among 1,408 defined contribution (DC) plan participants and defines a “super saver” as someone who saves 90% or more of the Internal Revenue Code Section 402(g) maximum contribution limit ($17,550 or more in 2020) or someone who defers at least 15% of pay into retirement plan accounts. More than half of super savers surveyed make less than $100 thousand per year. Forty-three percent of super savers are in Generation X (ages 41 to 56), 49% are Millennials (ages 25 to 40) and 8% are the youngest retirement savers, Generation Z (ages 19 to 24).

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The top motivations for saving reported by super savers are to feel financially secure (66%) and to have a comfortable lifestyle in retirement (62%). At least one-quarter are looking to save more than $4 million by the end of their working years.

Principal found that super savers’ views on retirement differ from the views of non-super savers. Sixty percent plan to retire before age 65. Nearly one-third said they plan to be fully retired, and 41% plan on a phased retirement.

Not all super savers follow a budget—61% said they do—but the survey finds that super savers are willing to make financial sacrifices. Forty-five percent are driving older vehicles, 38% are not traveling as much as they prefer and 35% reported that they own a modest home.

Seventy-one percent of super savers started saving for retirement in their 20s. And the survey finds that they remained committed to retirement savings even during the COVID-19 pandemic. More than half (54%) reported that they saved more in the past 18 months thanks to decreased spending and/or stimulus payments.

Retirement is not the only thing super savers are saving for. Nearly all super savers (91%) have an emergency savings fund. Seventy-three percent reported that they have more than $10,000 saved for emergencies and 56% said they have enough to cover six or more months of expenses.

Principal suggests that almost anyone can mimic super savers’ behavior, and plan sponsors can help. It recommends that plan sponsors use a stretched match formula to encourage participants to increase their contributions and to use automatic enrollment, re-enrollment and deferral increases. Among other things, Principal also suggests that DC plan sponsors provide a way for participants to create an emergency savings fund and offer financial wellness education.

More information is available at https://landing.principal.com/retirement-readiness.

Reader Responses October 4, 2021

SURVEY SAYS: Getting Financial Help From Social Media

NewsDash readers share their views about getting help with financial decisions from social media.

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Last week, I asked NewsDash readers, “Do you feel social media can be a source for reliable financial help?” I also asked, “Have you ever used something on social media to help you make a financial decision?”

More than half (55%) of responding readers work in a plan sponsor role, 14% are/work for recordkeepers/TPAs/investment consultants, 27% are advisers/consultants and 5% are CPAs.

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Fifty-four percent said they feel reliable financial help can be found on social media, depending on the source of information. Approximately one-third (32%) said reliable financial help cannot be found on social media, and 14% indicated they don’t know or are unsure.

However, the vast majority (86%) of responding readers reported that they have never used something on social media to help them make a financial decision, while 14% have.

While a few readers who left comments said they think social media could be a place to get basic financial information or education, most firmly believed social media should not be trusted for financial help. Several indicated they would only talk directly to their adviser/broker. There is no Editor’s Choice this week.

A big thank you to all who responded to the survey!

Verbatim

If the social media platforms do as poor a job policing this stuff as they have on politics and COVID, we’re all doomed…

I am not sure if reliable financial help can be found on social media as the term is very broad. If a person is using social media to navigate to a reputable entity for information, then yes. If a person is relying on input from their “friends” on social media for advice, then no. I prefer knowing my financial advisers and meeting with them face to face.

Social media is just that – social. While there are reputable sources posting financial information, the topics and answers would have to be very broad and general. If you’re not talking to a financial professional who can help decode the language, as well as decipher what is actually being asked, the information garnered can do more harm than good. Each person has a unique financial fingerprint, and answers without follow-up or in-depth discussions can lead to making bad financial choice.

I think social media can be a great way to share basic financial concepts and improve financial education.

It is odd to think of financial “influencers” without thinking that they are pushing something they aren’t 100% knowledgeable on or are getting some type of kickback on.

Instead of using social media I find it best to speak to a financial adviser in person.

I still rely on my instincts and prefer to discuss financial issues with my broker or other trusted financial managers. I like hands on, face to face information from where/whom I know the source.

I surely wouldn’t use social media as my only source, but I do find it can introduce me to various subjects or products for me to investigate.

Misinformation is a real problem with today’s social media. I think there is a lot of good information out there, but it might be hard to tell the good source from the bad in the current environment.

I suppose if you trust social media to self-diagnose medical issues, then you trust it for your financial advice. But I wouldn’t recommend either.

“Buyer beware”

I usually take things I see on social media with a grain of salt, but who knows that could change.

 

NOTE: Responses reflect the opinions of individual readers and not necessarily the stance of Institutional Shareholder Services (ISS) or its affiliates.

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