Planning Ahead Can Increase Retirement Savings

As workplace benefit enrollment season approaches, a new survey by Corebridge Financial revealed a strong correlation between advanced planning and an expected increase in retirement saving.

Workers who prepare in advance for open enrollment were, according to their responses, twice as likely to feel positive about their retirement plans as those who did not prepare, the research found.

The survey also highlighted that plan sponsors and advisers can help participants by prompting early preparation and proactive financial planning. Nearly half (48%) of employees who reported planning ahead said they intend to increase their retirement contributions during open enrollment, while among those who do not prepare ahead of time, only 19% planned on increasing their retirement contributions.

“While many people think of open enrollment as a time to make decisions about medical or dental benefits, advisers can emphasize that this is also good time for a retirement wellness checkup,” says Terri Fiedler, president of retirement services at Corebridge Financial.

The Corebridge survey found that more than 40% of early planners said they would review their current retirement contributions during open enrollment, compared with just 25% of non-planners.

Fiedler says revisiting retirement plans, goals and progress is a great place for advisers who work directly with participants to start their conversation. By gauging the current status of retirement planning, participants and can better evaluate appropriate actions to take during the open enrollment period.

For those participants considering increasing their contribution, advisers may also be able to help them identify space in their budgets and financial plans to offset such an investment.

“Advisers can help participants think holistically about how their various workplace benefits fit together to make more informed decisions,” says Fiedler. “For example, the amount of disability coverage that you opt for during open enrollment can help prevent having to dip into retirement savings if you have to unexpectedly leave work due to a disability.”

Growing Awareness

Among those planning to increase their contributions, younger employees—especially those in Generation Z—are leading the way. According to the survey, 51% of Gen Z workers plan to increase their retirement contributions by at least 2% during open enrollment. This reflects a growing awareness among younger employees about the importance of saving for retirement early and maximizing their contributions during periods like open enrollment.

For those already enrolled in workplace retirement plans, increasing contributions during open enrollment can have a substantial impact on long-term savings, according to Corebridge, which provided a hypothetical scenario to illustrate the potential.

An employee earning $50,000 per year and contributing 6% of their salary could see their retirement savings grow to more than $375,000 over 30 years, assuming an 8% return on investments. If that same employee increased their contributions to 8%, their savings could rise past $500,000, excluding employer matches, salary increases and other factors, according to the firm.

While most employees (82%) find their employer’s open enrollment process simple, a significant minority still reported facing confusion. Those who said they find the process challenging highlighted the need for more personalized support and interactive educational tools. Nearly 30% of respondents cited understanding the various benefit coverage options as the most daunting part of open enrollment.

“Our research found that employees who find the enrollment process confusing value one -on-one support. This was the top factor cited by respondents on how to make the enrollment process easier,” says Fiedler. “Meeting with participants in advance can help them better understand their benefit options, determine cost differences from year to year, visualize the impact of their choices and inspire action.”

Key Provision Now Available

The SECURE 2.0 Act of 2022 aimed to improve retirement outcomes by increasing access to retirement plans and helping individuals manage competing financial priorities while saving for retirement, and Fiedler says plan advisers should be aware of a crucial new option that employers may—but are not required to—offer.

Section 115, which went into effect this year, allows individuals to take up to $1,000 in emergency expenses from their tax-preferred retirement savings accounts without incurring the additional 10% tax that typically applies to early distributions.

“For those hesitant to increase retirement plan contributions during open enrollment because they’re prioritizing building their emergency savings, this provision can help them balance both priorities,” says Fiedler.

The 2024 Corebridge Open Enrollment survey was conducted online by Morning Consult on behalf of Corebridge Financial on August 2 and 3, among a sample of 1,035 adults.