Although 72% of workers say saving for retirement is their top financial goal, a survey by T. Rowe Price found they may not be saving enough to adequately prepare for their needs.
The survey, conducted in August by Harris Interactive and released Wednesday, found that 92% of workers with access to a 401(k) plan through their employer are contributing to it. But 68% are contributing 10% or less of their salary to the plan.
“Employees should be saving at least 15%, including their employer match,” Christine Fahlund, senior financial planner for T. Rowe Price, told AdvisorOne on Thursday.
In addition to low deferral rates, 29% of workers aren’t even sure how much they’re saving in the plan.
Advisors can help their clients increase savings rates by helping them sign up for automatic escalation if their employer offers it, Fahlund said. “They can probably pick, depending on the company, an increase of one percentage point or two percentage points a year,” she said. “It won’t provide a severe shock, so by the time it gets to 15%, they’re used to it.”
For those workers who are saving well, Fahlund says their success is based on a combination of factors. “Advisors are one of our key assets in getting the word out and guiding people,” she said, adding that the press is “not far behind” in the same goal.
Another factor in employees’ success is their plan sponsor. “Sponsors are eager to educate employees. They provide a lot of education with written materials and meetings,” she said. She also stressed the value of the various online tools that are available. “It makes sense for individuals to use them and get a sense of, generally, are you on track or not?”
Fahlund was surprised to find saving for retirement was employees’ No. 1 financial goal. “We’ve done a good job if we’ve got retirement to No. 1.”
She was disappointed to find that more workers weren’t saving at least 15%, though. “Obviously, we have to work harder.”