For employees, the impact of a workplace retirement plan is undeniable. More than 70% of respondents in a study by Bank of America Merrill Lynch said their employer-sponsored retirement plan will be their largest or second-largest source of income. However, just 34% said their employer does a good job of helping workers transition into retirement.
That lack of transition help could also be contributing to more workers postponing their retirement, the study found. More than three-quarters of respondents said they will work into their late 60s and 70s, up from 72% last year.
But, of course, many workers will work longer simply because they don’t have enough saved to retire. Just 38% of respondents said non-workplace accounts will provide their largest or second-largest source of income, so it’s troubling that one-quarter of workers within five years of retirement said they expect to have less than $250,000 saved by the time they retire. The large majority of workers overall think they aren’t saving enough, and 60% don’t think they’ll ever have enough to maintain their standard of living in retirement.
“Corporate benefit leaders, the retirement services industry and legislators must continue to work together to improve and protect the effectiveness and health of our country’s retirement system,” Kevin Crain, head of Institutional Retirement and Benefit Services for Bank of America Merrill Lynch, said in a statement. “We see many employers actively working to empower employees to take greater control of their financial success, as well as enhancing their financial benefits to ensure they are results-based, easy to use and encourage healthy behaviors.”
Nearly 60% of workers said they need the most financial help with retirement planning issues. When asked what financial planning resources they’d like their employers to provide, more than half wanted access to a financial planner who could work with them one on one. Online tools were the second most popular resource. Nearly 40% of workers said they were interested in seminars that address their life stage and personal financial situation.
Unfortunately, health care may be taking money out of workers’ retirement pockets. Eighty percent of respondents said their health care costs have gone up in the last two years; of those, 56% say they’re saving less for retirement.
The survey found HSAs are becoming increasingly more common, if not necessarily more popular. While 76% of employees said their company offers a plan, just 38% of them said they participate in it. Participation is largest among workers closer to retirement (50%), but over a third of younger workers participate as well.
The good news is younger workers may have gotten the message that they need to start saving early. The report found the majority of younger workers may be comfortable with a default deferral rate of 5%. Over half are already contributing at least that much, and just 8% contribute less than 3%.
Among pre-retirees, 56% are contributing at least 10% of their salary and almost 30% contribute 15% or more.
Most employers offer a match, and 78% of respondents said they contributed at least enough to meet it. However, few participants are contributing the maximum amount allowed. Just 20% of all respondents said they contributed the maximum allowed last year. Among pre-retirees, just 37% contributed the maximum.
The report found respondents are clearly interested in guaranteed retirement income, and are even willing to give up some of their current income for guarantees in retirement. Nearly 80% of respondents said they’d give up 5% of their current income for a guarantee that they could live comfortably in retirement, and 38% would give up 10% or more. Over half of pre-retirees said they would give up 10% or more of their current income for such a guarantee.
When asked what they would do with an extra $1,000, over a third of respondents said they would pay down debt and about a quarter would put it toward retirement. Fifteen percent would use it to meet day-to-day obligations, and just 8% would use it on something special. The under-30 crowd was especially likely to say they would use a bonus to pay down debt, while pre-retirees were more likely to save it for retirement.
The report surveyed more than 1,000 employees at companies of various sizes in March. All employees were enrolled in a 401(k) plan.