As 2021 ends, new insights into how the pandemic has impacted retirement savings are emerging. A study by recordkeeper Empower Retirement provides insights based on a study with about 4 million retirement plan participants. Understanding the trends helps plan sponsors to steer forward.
When 2020 ended, so much was in shift, that it was hard to truly understand the implications of pandemic-related disruption on retirement saving behavior. Now, some of the trends are becoming more clear. By harvesting the insights, plan sponsors can anticipate the needs and interests of retirement plan participants. Empower Retirement’s recently released study, Empowering America’s Financial Journey reveals several important trends, as reported by Plan Sponsor:
On average, Empower finds that participants are saving at recommended levels of 10% to 15%, including both employer and employee contributions. Excluding any employer matches, employees are putting away 8.2% of their salary into workplace retirement plans—a number that’s been trending upward over the past two years. There has been a strong recovery in participants’ contributions to their plans from pandemic lows, with 85% of those eligible contributing.
Although Americans are saving more on average, there are many who still face challenges meeting their retirement needs. Troubles making ends meet and paying back debt, the most-cited challenges workers face, mean that 36% of workers say they aren’t saving enough. Managing finances is especially challenging for those making less than $60,000, with 45% of those in that group saying they are not contributing enough to their 401(k) plans and 61% saying that making ends meet is limiting their ability to save. Participants with incomes greater than $120,000 have saving rates that are significantly higher than those with incomes of less than $60,000.
Ensuring that plan service providers are providing participants with plenty of clear, informative and digitally accessible educational materials and, facilitating retirement account portability for employees changing jobs are among the beneficial actions plan sponsors can take heading into 2022. Of course, it is also key to initiate or increase the employer match. Even modest percentages end up making a big difference. Remember too, that the Department of Labor now requires income illustrations to help participants better understand how far their current level of saving will take them.
Planning for 2022?
As you plan for 2022, it remains a DOL requirement for your retirement plan to have a current ERISA Bond—and this must be issued from a U.S. Treasury listed business, such as Colonial Surety Company. As a national leader in the field, Colonial can help you with the required ERISA Bond for the plan —and much more. We offer affordable coverage to help plan sponsors navigate the times at hand—and even include extended coverage to ensure your ERISA bond remains U.S. Department of Labor compliant. Colonial makes it easy, fast, and direct to quote and purchase your coverage package online, from anywhere.
Especially given the tremendous challenges the last two years has dealt us, some of the trends related to retirement saving are quite positive. For example, according to Empower Retirement’s survey:
- With the oldest members still only 24 years old, Generation Z accounts for the highest proportion of contributing participants in their defined-contribution plans…
- Three in five workers believe they are saving enough in their 401(k) plans. The study indicates that average worker savings rates are higher now (8.2%) than they were pre-pandemic, in the fourth quarter of 2019 (7.8%).
- More than half (52%) of those surveyed said they used tools and information from their 401(k) provider’s website to make financial and retirement decisions. The study shows that as web interactions rise, so do saving rates.
As exciting as this evidence of the vibrancy of retirement plans is, it’s critical for plan sponsors to realize that allegations and lawsuits implicating fiduciaries, as well as regulatory action and audits are also trending up. So too are the government’s expectations about the role of plan sponsors in cybersecurity. That’s why, as you head into 2022, no matter how diligent you are in your fiduciary duties, it is wise to protect yourself—and your assets. Colonial Surety makes it affordable for plan sponsors to obtain fiduciary liability insurance. Importantly, this protects you—and your assets— from personal liability in the event you are faced with allegations of a fiduciary breach. With Colonial’s package, the annual premium is less than what you would pay for even one hour with an expert ERISA lawyer—and we even include cyber liability insurance. Select your affordable package in minutes and receive:
- The ERISA bond is required to protect the assets of the retirement plan from theft.
- Fiduciary Liability insurance to protect you and your assets from personal liability.
- Cyber Liability insurance to safeguard your company and plan from covered losses and expenses in the event of a cyber breach.
Colonial Surety Company is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed and in business all across the country. Serving customers since 1930, we are the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. With a Trustscore of 4.8, we help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time.