What Participants Think—and Do—About Retirement Saving, During the Pandemic

Now in its 7th year, the PLANSPONSOR Participant Survey tracks the behaviors, decisions and preferences of plan participants of all types.

It may take years to fully understand the impact of COVID-19 on retirement savings, yet the 2020 PLANSPONSOR Participant Survey provides early insights into how savings behaviors have changed and how the “new normal” could affect plan sponsor decisionmaking, going forward.

To further sharpen the picture of the pandemic’s effects by way of contrast, we, this year, stepped outside the company plan, including unemployed workers in our respondent base.

Overall, plan participants have remained largely steadfast in their retirement goals as the pandemic stretches into its ninth month, with 36% planning to retire before age 65—consistent with 2019’s findings. And confidence in achieving retirement happiness remains high even with this year’s pervading market volatility and economic uncertainty: Exactly 50% of respondents remain “confident” or “very confident” they will achieve a comfortable and secure retirement, vs. 48% last year.

Despite this enthusiasm, participants in employer retirement plans were less likely to have taken positive steps to improve their retirement outcomes this year, with just 26% reporting having increased their deferral rate, vs. 43% last year. Rebalancing plan investments also slowed, falling to 10% of respondents from 16% last year.

The hesitancy to act was also apparent among employees who lacked access to an employer-sponsored plan, as the percentage of those “likely” to enroll in such a plan if one were offered dropped to 53% after topping 60% in two of the past three years.

However, the impact of the pandemic may be hardest felt among the unemployed, of which a disproportionate number of respondents were women (76% vs. 46% of employed respondents) and people who reported having less education—63% of unemployed respondents had no college degree vs. just 22% of employed respondents. Industry research published in recent years has noted that these demographics often face more challenges to achieving retirement security, so it is unsurprising that lower income levels and a lack of savings options could amplify the impact.

As if that was not concerning enough, the survey found that unemployed respondents were far more likely to have minimal retirement savings, as 48% reported having saved less than $25,000 for retirement, vs. only 14% of employed respondents.

What is clear from the data is that plan sponsors can resume—perhaps with some adjustments for the times—evaluating how to improve participant behaviors. For example, they could work with their providers to create communication campaigns that encourage reviewing one’s deferral rate and rebalancing one’s account or other such actions common and accepted pre-COVID-19. Sponsors might also consider re-enrollment campaigns or might review the strategies/materials used to enroll new hires in the company retirement plan.

Finally, the evidence is becoming increasingly clear that financial wellness programs work, as 83% of participants who took advantage of such programs when offered reported that these were “extremely” or “very” helpful at improving the individual’s financial situation or reducing his financial stress.

Importantly, participants value the relationship they have with their employer, as employed respondents reported Net Promoter Scores® of +12% vs. the -24% rating unemployed respondents gave their previous employer. Net Promoter Score measures customer satisfaction, by subtracting the percentage of 0 through 6 responses (detractors) from that of 9 and 10 responses (promoters).

Plan sponsors that can transform this goodwill into good retirement savings outcomes for participants stand the best chance of helping employees achieve retirement readiness. —Angela Marinakis