- Customer-driven insights show how workers are investing, where they hit roadblocks and what they can do to maximize their retirement nest eggs
- Pandemic boosted savings rates as confidence climbs for many
- Women become better savers as incomes rise
GREENWOOD VILLAGE, COLO. Dec. 1, 2021 – The COVID-19 pandemic, now nearly two years long, has proven to be a catalyzing event that has helped change the way many Americans manage their money. Despite economic uncertainty, workers placed more money into their 401(k) plans in 2021 than in the previous year as the effects of the pandemic rippled through their lives and the economy and changed the way they relate to money.
That’s just one of the revelations unpacked in a comprehensive new study of the savings behaviors of millions of retirement savers at Empower Retirement. The study, “Empowering America’s Financial Journey,” released today, examines the savings patterns of millions of Americans saving for retirement in corporate workplace savings plans.
“Ultimately what we are seeing is that there’s a tremendous case for optimism in the way people have behaved toward their retirement savings and other financial needs through the pandemic,” said Empower Retirement President and CEO Edmund F. Murphy III. “However, there’s also a full range of demonstrated needs across demographic cohorts as people must make the optimal choices to meet their needs, support their families and work toward their goals.”
The study of retirement savers shows:
- Workers are saving more — and with confidence: A majority of workers (three in five) believe they are saving enough in their 401(k) plans. Compared to pre-pandemic levels (4Q19), average worker savings rates are higher (8.2% vs. 7.8%), and the percentage of eligible participants contributing to their 401(k) plans has also risen (85% vs. 84%).
- Gen Z is ahead: Gen Zers account for the highest proportion of savers contributing to their workplace retirement plans, with their overall percentage even higher than those of working baby boomers, who are fast-approaching retirement. Remarkably, many Gen Zers also said they have already started planning for retirement (beyond just contributing to a retirement plan).
- Women become better savers as income rises: Women feel less confident than men that they are saving enough in their 401(k) plans (49% vs. 64%). They are also saving slightly less on average than men (7.9% vs 8.5%), but there appears to be positive movement in closing that gap. Women are saving at higher average rates than men at income levels above $60,000.
- Automatic features are a good start, but engagement is needed: Plans with auto-enrollment help increase participation rates in workplace savings programs, but savers tend to remain unengaged with such savings plans after enrollment.
- Savings strategies are shifting: When available, almost one in five 401(k) participants are diversifying their taxable retirement savings by making Roth contributions, and Roth contributors are saving at a substantially higher rate than those not contributing to Roth accounts (10.2% vs 7.9%).
“We are excited to bring real-time customer-driven insights forward in an effort to understand what drives American savers; what advice are they seeking; and how we can deliver personalized, meaningful strategies that help savers replace their income in retirement,” said Claudia Step, Senior Vice President and Chief Customer Experience Officer.
Empower Retirement is the nation’s second-largest retirement plan recordkeeper by total participants.1 Through this study, Empower aimed to gain a deeper understanding of Americans’ financial journeys, including where they hit roadblocks and what financial strategies are working best for them.
The inaugural study from Empower provides a comprehensive view of workers’ savings behavior and retirement preparations and provides insights on the behavior of approximately 4 million active corporate defined contribution plan participants to better understand their savings habits, level of involvement with retirement planning and where they are turning for help. With access to millions of annual participant transactions and retirement plan interactions, Empower is able to provide a unique window into the state of Americans’ retirement finances.
The study extends beyond a quantitative look at Americans’ savings situation. It also evaluates Americans’ attitudes, confidence and sentiments related to retirement planning. In addition to looking at savings patterns of Americans participating in workplace savings plans, Empower also surveyed more than 2,500 Americans.2
Watching trends and savings patterns enables financial professionals to break down savers’ needs and design real strategies that could make a difference for savers’ retirement savings accounts, Step said.
“We want to move savers past any real or perceived roadblocks keeping them from maximizing their savings,” Step said. “We believe that giving savers a holistic view of their finances and personalizing their financial roadmap builds confidence and ultimately leads to better savings rates and outcomes.”
About Empower Retirement
Headquartered in metro Denver, Empower Retirement administers approximately $1.1 trillion in assets for more than 12 million retirement plan participants3 and is the nation’s second-largest retirement plan recordkeeper by total participants.1 Empower serves all segments of the employer-sponsored retirement plan market: government 457 plans; small, mid-size and large corporate 401(k) clients; nonprofit 403 (b) entities; private-label recordkeeping clients; and IRA customers. Personal Capital, a subsidiary of Empower Retirement, is an industry-leading hybrid wealth manager.
For more information please visit empower-retirement.com and connect with us on Facebook, Twitter, LinkedIn and Instagram.
Stephen Gawlik – 617-417-4408 – Stephen.Gawlik@empower-retirement.com
Monica Mendoza – 719-373-2460 – Monica.Mendoza@empower-retirement.com
To learn more about how we’re empowering plan sponsors and their participants to be more engaged in their retirement plans than ever before, call us at 800-719-9914.