Slower Retirement Savings Projected
Employees who save for retirement through their employers' 401(k) plans are not planning to sock away more for retirement over the next year as compared to last. In fact, those closest to retirement are actually decreasing their planned savings for the future. These alarming facts were revealed in the latest edition of the annual "Mercer Workplace Survey." While participants in general are more optimistic about the economy, they are planning to save slightly less over the next 12 months, and those over the age of 50 have lowered their expected savings amounts by about 18 percent. Mercer's spokesman noted that savings rates obviously tie to, and build, participants' expectations for retirement — and right now, those expectations aren't great. Participants are worried about paying their future bills and some are planning on working longer.
Participants clearly see trouble ahead in achieving a comfortable retirement. Nothing exemplifies this better than a retirement concern that was barely on the map a few years ago — paying for health care in retirement. Since 2007, saving for health care expenses in retirement has doubled as a major savings goal (up from 17 percent to 34 percent) — yet only 35 percent believe they'll have enough money to pay for it. This issue is now the number one concern and the "biggest financial worry" amongst those 50 years and older.
"Most are worried about health care in retirement, yet most think they won't have enough money to pay for it. The logical conclusion would be to see an increase in savings to tackle this expected problem, but our survey shows this is not the case," said Mercer spokesman Dave Tolve.
Plan sponsors can encourage 401(k) participants to improve their retirement saving abilities and outlook by:
• Educating participants through various media about the value of tax-advantaged retirement savings versus other savings vehicles.
• Demonstrating how saving a bit more today can have an enormous impact in meeting anticipated costs of tomorrow, even for those over age 50.
• Providing easy-to-use online tools and resources to influence participants in a way that is meaningful and relevant to them.
SESCO Management Consultants is available to assist with your human resource issues. You may contact us by phone at 423-764-4127 or by email at sesco@sescomgt.com.