Automatic plan features for employees: Helping to make saving for retirement less challenging

Retirement savings are a critical component of financial security, yet many employees fail to save adequately for their future. Historically, 401(k) plans have relied on voluntary participation and self-selected contribution levels, which often resulted in suboptimal saving behavior. Our research shows that more younger (38%) than older (25%) employees are contributing less than 5% of household income toward their retirement.¹ This retirement savings gap can also be seen across gender, ethnic and income segments.

 

Incorporating effective plan design elements, like automatic 401(k) programs, may help simplify the enrollment process and encourage higher contribution rates over time. Additionally, gaining a better understanding of the demographic differences and saving behaviors within your workforce will enable you to optimize your plan design to enhance employee engagement and improve financial wellness.

 

This paper discusses the following:

 

• Automatic 401(k) programs
• Closing the retirement savings gap
• Supportive legislation
• Employer benefits

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Read our report for additional insights into the implementation of automatic 401(k) enrollment and automatic increase features within these plans and how they may offer substantial benefits for employees, employers and the broader economy.