Principal’s “Super Saver” research reveals that it isn’t just older generations or people making the highest salaries who are maximizing their retirement savings.
Principal conducted the research in July among 1,408 defined contribution (DC) plan participants and defines a “super saver” as someone who saves 90% or more of the Internal Revenue Code Section 402(g) maximum contribution limit ($17,550 or more in 2020) or someone who defers at least 15% of pay into retirement plan accounts. More than half of super savers surveyed make less than $100 thousand per year. Forty-three percent of super savers are in Generation X (ages 41 to 56), 49% are Millennials (ages 25 to 40) and 8% are the youngest retirement savers, Generation Z (ages 19 to 24).
The top motivations for saving reported by super savers are to feel financially secure (66%) and to have a comfortable lifestyle in retirement (62%). At least one-quarter are looking to save more than $4 million by the end of their working years.
Principal found that super savers’ views on retirement differ from the views of non-super savers. Sixty percent plan to retire before age 65. Nearly one-third said they plan to be fully retired, and 41% plan on a phased retirement.
Not all super savers follow a budget—61% said they do—but the survey finds that super savers are willing to make financial sacrifices. Forty-five percent are driving older vehicles, 38% are not traveling as much as they prefer and 35% reported that they own a modest home.
Seventy-one percent of super savers started saving for retirement in their 20s. And the survey finds that they remained committed to retirement savings even during the COVID-19 pandemic. More than half (54%) reported that they saved more in the past 18 months thanks to decreased spending and/or stimulus payments.
Retirement is not the only thing super savers are saving for. Nearly all super savers (91%) have an emergency savings fund. Seventy-three percent reported that they have more than $10,000 saved for emergencies and 56% said they have enough to cover six or more months of expenses.
Principal suggests that almost anyone can mimic super savers’ behavior, and plan sponsors can help. It recommends that plan sponsors use a stretched match formula to encourage participants to increase their contributions and to use automatic enrollment, re-enrollment and deferral increases. Among other things, Principal also suggests that DC plan sponsors provide a way for participants to create an emergency savings fund and offer financial wellness education.
More information is available at https://landing.principal.com/retirement-readiness.
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