Most workers are unknowingly skimping on their 401(k)s
A large chunk of US employees are not making contributions to their workplace retirement plans – and they don’t even know it.
That’s according to the Principal Retirement Security Survey, which found nearly 59 percent of employees who are not actively contributing to their 401(k) or similar plans mistakenly believe they are doing so. Among that cohort, three quarters (77 percent) thought they already started saving as soon as they became eligible to contribute.
That confusion, coupled with ongoing inflation and high interest rates, is creating additional challenges for Americans trying to achieve their retirement goals.
Looking at eligible workers who were not contributing to their retirement plans, Principal found they had to de-prioritize their nest eggs for numerous reasons including high monthly expenses (39 percent), paying off debt (36 percent), and insufficient income (34 percent).
“American workers are balancing a lot right now and it can feel overwhelming to employees who are trying to meet their needs today and invest in their long-term financial security,” Chris Littlefield, president of retirement and income solutions at Principal said in a statement.
“Through good plan design features like automatic enrollment and regular communication, we have seen significantly improved savings and participant engagement,” Littlefield said.
The numbers suggest adding automatic enrollment features to retirement plans – including auto enrollment, automatic increases in contribution rates, and auto-sweeps – can do wonders for employee participation.
According to the survey, 62 percent of employees would continue saving if automatically enrolled in their workplace retirement plan. More broadly, plans with automatic enrollment
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