Education, Examples Help Participants Do the Math

July 23, 2014 ( – Data-driven examples can help participants understand just what they’re giving up when they don’t contribute enough to meet the match, TIAA-CREF says in a survey.

More than three-quarters of Americans who contribute to an employer-sponsored retirement plan (78%) receive matching contributions from their employer, and 77% of those who have matching contributions save enough to receive the full employer match, according to TIAA-CREF.

However, only 72% of women contribute enough to receive the full employer match, compared with 82% of men, and only 64% of those earning less than $35,000 a year receive the full match. In addition, only 51% of those with less than $10,000 in assets receive the full match.

When employees fail to get the full match their employers offer, they are essentially walking away from free money, according to Teresa Hassara, executive vice president of TIAA-CREF’s institutional business.

The findings from TIAA-CREF’s 2014 Perfect Match Survey represent a great opportunity for employers, says Sue Fulshaw, managing director of retirement plan product management at TIAA-CREF. “It’s a huge opportunity for us to continue to drive data-driven examples,” she tells PLANSPONSOR.

“We found that the majority of respondents (84%) would consider increasing their retirement plan contributions when they have a salary increase,” Fulshaw says. This makes that the ideal time for plan sponsors to reach out to participants to encourage raising their contributions.

Those communications should include data-driven examples, Fulshaw says. “Show employees what an increase would mean to them in retirement,” she says. “It’s hard for people to do the math.” People were unable to visualize what a 1% increase in contributions means, and sponsors can show them by doing the calculation for them.

Women said they would increase the match if they had more information, according to Fulshaw, who says that TIAA-CREF responded with additional information, counseling, one-on-one services and advice services to help them plan. Compared with men, just 72% of women were contributing enough to a plan to get the employer’s match, the survey found. In an earlier survey, TIAA-CREF found that women showed less confidence in their planning abilities than did men (see “Men More Confident About Saving for Retirement”).

The reasons for this lower contribution rate are ameliorated somewhat by women’s openness to learning more about finance. “Women are balancing competing financial demands,” Fulshaw observes. “But they’re open to education, and it’s a matter of providing education and counseling services to help them understand what they can do.”

Statistics can be looked at in a different light, and Fulshaw says the fact that three-quarters of Americans do contribute to a plan with a match is still good news. “Those are good numbers,” she says, “and 77% are getting the full match. The huge opportunity I see is how hard it is for people to do the math.”

People struggle to understand how the amount they contribute today will translate into a tangible, concrete amount in the future. “That’s a bridge many plan sponsors and plan advisers have been working on,” Fulshaw says.

About a third of survey respondents (32%) thought that a 3% employer match would be worth less than $50,000 by the time they were age 65—but in the example given, the match would be worth $72,518. Some respondents—women, members of Generation Y and workers earning less than $35,000 a year—were even likelier to underestimate the future worth of the employer contribution. “That’s a big difference when you do the math and you can see the impact,” Fulshaw says.

That disconnect is a chance for plan sponsors and plan advisers to sit down and work with participants to help them understand how their contributions will affect their retirement, “but we can do a better job of trying to communicate that to employees,” Fulshaw says.

As well as data-driven examples, Fulshaw recommends sit-down counseling and planning sessions. Do the modeling so they can see what they can change to meet those retirement goals.

Plan sponsors can do a lot to reach out to lower-income workers who feel unable to reach the full match, Fulshaw says. Employers can gain more information and competency through a combination of communications, education, workshops on debt management and how to balance competing financial needs.

“Getting the full employer match on retirement savings, even if the percentage doesn’t seem like a lot on paper, can have a significant impact on the total value of an employee’s savings by the time he or she retires,” Hassara says. “Providing employees with more concrete examples like these can really underscore the importance of increasing their contributions to maximize their match.”

The findings come from TIAA-CREF’s Perfect Match Survey, which was conducted among a sample of 1,000 employed adults, age 18 and up, currently contributing to an employer-sponsored retirement plan; it was performed by an independent research firm between May 19 and 28.  

TIAA-CREF’s 2014 Perfect Match Survey can be downloaded here.