Empowering America’s Financial Journey™ 2023 – Government sector

Empowering America’s Financial Journey 2023 – Government sector


About the study

Stubborn inflation and rising interest rates strained the family budgets of many public sector employees in 2022. Against that backdrop, the results of the second annual Empowering America’s Financial Journey (EAFJ) study provide a view into how America’s public sector workers are faring related to retirement and financial planning. The study analyzed the behavior of approximately 1.58 million active participants in state and local defined contribution (DC) plans with Empower as the recordkeeper.

The study is structured around the following three themes:

  • Trends to watch
  • Savings and engagement
  • Improving outcomes

Below is a snapshot of the study’s key findings.

Trends to watch

Participants are worried about the economy, and that worry is impacting their behavior.

  • Inflation is a particularly strong concern, with 63% of government employees saying they are “extremely” or “very” concerned.
  • Public sector employees are keeping a close eye on their money and trying to make a little extra. More than four in 10 employees (45%) are cutting back on spending, up from 27% of those surveyed by Empower in April 2022. Many are delaying major purchases and taking side hustles. Far fewer are asking for help with their personal finances from a financial advisor.
  • Loans and hardship withdrawals from retirement accounts grew noticeably in 2022, with an 18% increase compared to the previous year. These loans and withdrawals can lead to significantly lower savings rates and account balances. Women and members of Generation X are disproportionately likely to be taking loans and hardship withdrawals.

Percentage of government and corporate sector employees “extremely” or “very concerned” about:

Savings and engagement

Participants are trying to keep an eye on the future despite the unsettled economy, and 2022 saw a modest increase in both contributing participants and their average annual savings rates. However, lower-income workers are finding it harder to set money aside.

Average quarterly savings rates and percentage of eligible and contributing participants 


Lower-income participants are saving less than their higher-income counterparts. The savings rate is 5-6% for those making less than $60,000 compared to more than 8% for those making more than $120,000. The average savings rate for female public sector workers is 9% lower than men, and their balance is 40% lower.

Individuals who are more engaged with their retirement plans see better outcomes than those who are less engaged. Public sector participants who visited their plan website, used the app, or contacted customer service at least three times in a 12-month period saved an average of 75% more. In addition, more engaged participants have 40% higher balances than less engaged participants.

Improving outcomes

The majority of public sector participants use professional management by investing in target date funds or managed funds. The proportion of public sector participants using professional management grew to 55% in 2022, up 3% from the previous year, as volatile and down markets caused some participants to seek help.

Participants by investment approach


Participants who choose managed funds are more engaged overall and typically save more money than participants with target date funds. More than six in 10 (62%) of managed account participants are engaged compared to 43% of target date fund users. Managed account savings rates are 24% higher than those of target date fund users.

Participants who are engaged with their retirement planning are likely to seek out help, plan more diligently, and make more informed decisions. And those linking outside accounts have a more comprehensive picture of their financial situation and have savings rates of almost 11% — substantially higher than the overall average.

Key takeaways

The economy and financial markets are in a period of uncertainty, and participants need help managing their spending and saving so they may stay on track with regard to their retirement goals. As public sector pension plans may not fully meet participant retirement income needs, participants also need help making sure they’re saving enough to live comfortably in retirement.

Download the full study to learn more.


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