The “Retirement For All” initiative was designed to encourage plan sponsors, their advisers and consultants, and plan participants to better address to the process of saving for retirement. As part of this initiative, a website has been established (www.troweprice.com/retirementforall) to provide information on plan design strategies and insight on individual saving behaviors.
“The overriding goal with Retirement For All is to help everyone see the critical need that most people have to increase their retirement savings, while showing them practical steps they can take to act accordingly,” said Aimee DeCamillo, head of Product and Marketing, T. Rowe Price Retirement Plan Services.
DeCamillo pointed to figures that show the need for efforts like this, including:
- More than one-third (37%) of workers ages 55 and older are not currently saving for retirement;
- Nearly half (49%) of workers are “not at all confident” or “not too confident” about having enough money for a comfortable retirement;
- Only 46% of workers reported that they and/or their spouse have tried to calculate how much money they will need to have saved by retirement to live comfortably in retirement; and
- More than half (57%) of workers report that they and/or a spouse have less than $25,000 in total savings and investments, excluding their home and defined benefit plans, with 28% having less than $1,000 saved.
“Industry research clearly indicates that the top driver, by far, of retirement success is one’s saving rate,” said DeCamillo. “It’s many times more important than other factors, including asset allocation. Improving savings rates is arguably the most important thing we can do help retirement plan participants.”
T. Rowe Price research seems to show that two of the most critical success factors for plan sponsors in driving higher retirement plan savings rates are providing for the automatic enrollment of newly hired employees and the automatic escalation of savings deferral rates for plan participants.
For example, an employer could automatically enroll eligible employees at a 6% salary deferral rate and drive savings by encouraging opt-out automatic increase at 2% up to 20%. Participation rates in plans record-kept by T. Rowe Price with automatic enrollment are 67% higher than participation in plans without automatic enrollment. Only 8% of eligible participants sign up for automatic increase when offered as an “opt-in” service, but 65% use the service when offered as an “opt-out.”
DeCamillo added that employers can also take helpful steps such as targeting and personalizing employee interactions by develop communications for those most at risk of saving too little for retirement. She points to T. Rowe Price research that shows that personalized communications can increase deferral rates by 80% or more. She also recommended that employers incentivize savings through matching contributions.
“Plan sponsors, advisers, and consultants are in a position to help employees maximize their opportunities for financial security in retirement,” she concluded. “In the end, success requires a team effort.”