August 7, 2012 (PLANSPONSOR.com) – Although the majority of defined contribution (DC) plan participants say their DC plan is their primary retirement savings account, they are not putting enough into it.
A survey by Diversified found nearly seven in 10 (69%) respondents admitted that their DC plan at work was their only or primary retirement account. And in spite of the fact that the vast majority surveyed were at least middle-age (68% said they were 46 years old or older) with a reasonable income (64% made at least $75,000 annually), more than half (54%) said they had less than $100,000 saved for retirement. Thirty-seven percent had less than $50,000 saved. Only 3% said they had $1 million or more saved.
Sixty-one percent of DC plan participants surveyed said they were saving 10% or less of their annual salary – with 25% saying they were saving 5% or less. Only 19% said they were contributing significant funds into their retirement account – saving more than 15% annually.
The survey also found more than one-third (34%) either “guessed” or “made up” estimates for the income they will need in retirement; and only 30% said they consulted with a professional for help setting their goals. Two-thirds admit that they could use more guidance on how much money they will need in retirement.
“There’s no reason to guess,” said Patricia Advaney, senior vice president, participant solutions for Diversified. “With the abundance of help available—from online tools to guidance to advice—it’s much easier today for plan participants to calculate a retirement income goal, then take appropriate actions to get there.”
The good news is that 38% of participants reported that they had increased the amount of money they are saving for retirement this year over last year. Eleven percent took a loan against their DC plan over the past 12 months, and 3% said they took a hardship withdrawal. The survey was conducted via e-mail by Diversified in the first quarter of 2012 among 3,370 DC plan participants in plans administered by a wide variety of organizations.