Workers May Save More, But Save Less in Employer Plans: Survey

February 14, 2003 ( - More than half (55.7%) of survey participants say they would use the new individual savings options proposed by the Bush Administration - instead of saving in an employer-sponsored account.

The survey, conducted for Strong Financial Corporation, appears to validate some of the concerns already expressed by a number of industry experts (see  Industry Groups Fret About Impact of Bush Proposal ).

Another concern that the new plans share with current savings efforts – nearly half (45%) say they would be worried about the temptation to use these retirement savings for other purposes, according to the survey.

Eager Savers

While intentions don’t always translate into action, most workers appear eager to take advantage of the new savings accounts proposed by the Bush Administration.   Most (83%) of Americans would use one or more of the Bush Administration’s proposed savings accounts, if they were made available. Nearly 60% of the 1,000 respondents believe these new savings accounts will help them save more.

The President’s 2004 budget proposal would create three new tax-advantaged savings vehicles: the Lifetime Savings Account (LSA) and Retirement Savings Account (RSA), both essentially expanded and enhanced Roth IRAs, and the Employer Retirement Savings Account (ERSA), that would consolidate a variety of workplace retirement plans (including 401(k), 403(b) and governmental 457 plans) into a single retirement savings vehicle (see  ERSAs Bear Major Changes for Plan Sponsors).  

According to the Strong survey,

  • 71.3% will use a Lifetime Savings Account
  • 57.8% will use a Retirement Savings Account
  • 65.5% will use an Employer Retirement Savings Account

Appealing Features

The most appealing features of the accounts were tax-free growth for any savings purpose, cited by 32.6%, and withdrawals that can be taken at any time, without penalty (32.4%).   Strong noted that higher-income respondents were more inclined to find the tax-free growth for any savings purpose the most appealing feature, while lower-income respondents were drawn to the penalty-free withdrawal aspect.

Also cited as appealing by 14.4% of respondents were the simpler rules, and 13.4% favored the new, higher contribution limits.

The survey was conducted for Strong by TeleNation, a service of Market Facts, in February 2003.   Results are based on interviews conducted with 1,000 individuals at least 18 years old. Random-digit dialing was used to obtain a representative cross section of the US population.