According to the fifth annual Wells Fargo Middle Class Retirement study, 41% of middle class Americans between the ages of 50 and 59 are not currently saving for retirement, and 34% overall contribute nothing to a 401(k) or other retirement account.

People often say they’re too financially squeezed to save, says Joe Ready, director of institutional retirement and trust at Wells Fargo, but delaying retirement savings is not a great strategy and can have devastating consequences that participants do not realize.

Sixty-eight percent of all respondents say saving for retirement is “harder than I anticipated.” The difficulty has caused more than half (55%) to say they plan to save “later” for retirement in order to “make up for not saving enough now.” Nearly six in 10 (59%) middle class Americans between the ages of 30 and 49 say they plan to save later to make up for missed retirement savings, and 27% are not currently contributing savings to a retirement plan or account. 

“People really underestimate what that does to their retirement savings,” Ready tells PLANSPONSOR.

Advisers might want to stress the importance of a written financial plan. “A big part of what advisers do is sit down and help you plan for retirement,” Ready says. The complexity of the plan can vary, but the data is clear that putting some type of formal plan into place helps workers save more consistently and at higher rates.

“Those with a written plan save a median of $250 each month, versus $100 a month by those without a plan, a difference of two and a half times,” Ready says. A written plan should have quantifiable data that the investor can measure against, and it can be as simple as the amount to save each month.

The study has both good news and bad, but Ready calls several data points from the study encouraging. “Overall, people aren’t saving enough, and that trend hasn’t changed,” he says. “It’s a big challenge.” However, Ready notes the effectiveness of saving through 401(k) plans has helped a majority of survey respondents save more than they feel they would have without access to a 401(k), calling the 85% of those who expressed this idea “a powerful statistic.”

The Difference a Plan Makes

Also positive are the two-thirds of employees in plans taking advantage of the full employer match, and the savings amount. On average, those with access to a plan save 10 times more than those who lack access.  

People are still on the low end of where they need to be, however, Ready says, and the amount saved dipped from the previous study, from $25,000 to $20,000. About a third (31%) of all respondents say they will not have enough money to “survive” in retirement, and this increases to nearly half (48%) of Americans in their 50s. Nineteen percent of all respondents have no retirement savings.  

Plan sponsors and plan participants alike value highly the benefit of the workplace-based retirement plan, Ready says, and it may be time for the pendulum to swing back more to the middle. “One of the best things we as a society can do is promote a shared responsibility,” he says. The movement from defined benefit to defined contribution needs to be tempered. All the responsibility cannot fall on one entity—company, individual or government—alone.

Regardless of the match, companies that sponsor a plan provide a valuable benefit that employees appreciate, Ready points out. “Whether continuing the incentive for people to save for retirement on a pretax basis or providing Social Security, which the middle class is counting on, the government has a role,” he says. “And the employee clearly has a role: You own your own outcome.”

Surprisingly, although different demographics may face different challenges, Ready feels the messaging does not need to vary greatly when plan sponsors and plan advisers tailor their education and communication efforts. The message is simple, he says: Just get people in the plan.

For early savers—those at the beginning of their careers—the best message is the power of compounded savings over time, Ready says. Then, participants need to take simple steps, perhaps conducting a financial inventory and finding that extra $50 to $100 per month to begin saving. In the mid-career stages, the messaging is about the same, he says, but may have slightly more urgency in the call to action. “Don’t delay,” he warns. “The only way they are going to make a reasonable retirement outcome is through saving.”

On behalf of Wells Fargo, Harris Poll conducted 1,001 telephone interviews between July 20 and August 25, of middle class Americans between the ages of 25 and 75, with a median household income of $63,000.