Vanguard’s 2015 “How America Saves” report found 36% of plan sponsors automatically enroll participants in the company 401(k) plan, and most of those also increase contributions automatically. A report from New York Life released Monday might encourage the holdouts to reconsider why they haven’t offered automatic tools to their workers.
When contributions to financial accounts like 401(k)s are made automatically, investors are more likely to save in the first place, and feel confident about their ability to meet their goals, New York Life found.
The firm surveyed pre-retirees between the ages of 50 and 62 with household income of at least $80,000 about automatic deposits made into various types of accounts and found 64% say those automatic tools give them more confidence about their financial goals.
Respondents added that it’s very hard to save additional retirement funds outside of those accounts, and 45% would like more automatic tools.
Pre-retirees with children at home found it especially challenging to save additional funds. Fifty-eight percent said they struggled to save more than what their automatic deduction took from their paycheck, compared with 46% of all respondents.
Of the respondents who use automatic savings tools to fund a retirement account, 93% said they were confident it would help them reach their financial goals. Those who use automatic tools for other savings goals were slightly less confident.
Over 80% of respondents who use automatic savings tools to fund a college savings plans expressed confidence in the plan. Seventy-nine percent said they were confident that automated tools could make it easier to pay off their mortgage.
“These savings vehicles often fly under the radar, but are kind of a big deal. The ease and recurring nature of these savings methods make them highly effective tools for helping clients to achieve their financial goals,” Chris Blunt, president of New York Life’s Investments Group, said in a statement.