Employees might be saving more for their retirement than they were in the past, but employers still don’t expect workers to retire on time.
Deloitte’s Annual 401(k) Benchmarking Survey reports 401(k) balances are at an all-time high at just above $85,000 per participant. But only 12% of plan sponsors conclude “most employees are or will be financially prepared for retirement.”
Deloitte surveyed 400 respondents electronically, evenly distributed by geography, size and ownership status.
While it is encouraging that workers are saving more for retirement, Stacy Sandler, principal at Deloitte Consulting, says it’s not surprising that workers are unprepared to leave the workforce because they need more than just a 401(k) plan to retire on time.
She says workers are worried about their other assets, debts and home mortgages going into retirement. “Although [balances] are going up, there is still a question of overall retirement readiness.”
On a more positive note, employers are getting more serious about engaging their workers in retirement preparation, according to Sandler says. Seventy-eight percent of 401(k) plan sponsors rank retirement readiness as a top priority, the survey found.
But that doesn’t mean employees are taking advantage of these resources: the survey found about two-thirds of plan sponsors believe less than 10% of their employees are using the educational resources offered to them. These offerings include automatic enrollment, Roth 401(k) features and individual financial counseling.
“The tools being offered have a lower adoption rate,” she says. “It’s because employees are not educated about them, or are nervous about what they are. Should they do them, because of what the market has shown in the past?”
The survey found a 7% increase in the number of plan sponsors conducting retirement readiness assessments for employees to 32%, from 25% in 2011.
These resources have had a positive impact on those who do leverage them, Sandler says. Eighty-six percent of plan sponsors who implemented automatic enrollment, for example, have seen a positive impact on plan participation by employees. Also, more plan sponsors are offering individual financial counseling and advice, up from 50% in 2011 to 61% in 2012.