Seventy-one percent of employees report that their workplace savings plans will be their first- or second-largest source of retirement income, according to benefits provider Bank of America Merrill Lynch's 2013 Workplace Benefits Report.
The survey was conducted March 6-17, 2013, with 1,014 employees responding from U.S. companies of all sizes.
Two-thirds (66 percent) of employees said they contribute 5 percent or more of their salary to a 401(k) plan, the survey showed.
Among pre-retirees less than 10 years away from their planned retirement, more than half (56 percent) contributed at least 10 percent of their salary to their 401(k), and 29 percent contributed 15 percent or more.
Salary-deferral rates indicate that a majority of younger workers may be comfortable with an automatic deferral of 5 percent or higher. Among “early starters” (those under age 30 putting savings into a 401(k) plan), 55 percent contributed 5 percent or more of their salary, and only 8 percent of these younger workers had a contribution rate of less than 3 percent.
The rising cost of health care remains a top concern for employees. Eight out of 10 indicated they have experienced higher health care costs during the past two years—among whom more than half (56 percent) are saving less for retirement as a result.
Seventy-six percent of employees said their company now offers a health savings account (HSA) option; 38 percent participated in this tax-advantaged savings vehicle.
HSA participation increases to 50 percent among pre-retirees; however, the survey revealed that younger workers (35 percent) are also using this vehicle to start saving early for current and future medical expenses. Nearly half of all respondents (47 percent) who contributed to an HSA or flexible spending account (FSA) said they began doing so or increased their contributions as a result of rising health care costs.
According to consulting firm Devenir, nationwide assets in HSAs grew to an estimated $15.5 billion as of the end of 2012 and are projected to reach $26 billion by 2015.
When asked what financial matters they need the most help with, 59 percent of employees mentioned advice and guidance on saving for retirement, followed by managing debt, budgeting and planning for health care costs. A majority (58 percent) are seeking advice on all aspects of their financial life—including two-thirds of female employees (66 percent) and half of male employees (49 percent).
Respondents said the financial-advice resources and tools they would most like their employer to provide are access to a one-on-one relationship with a financial professional (51 percent), followed by online tools (46 percent), financial seminars relevant to their life stage and personal situation (39 percent), and relevant research or literature to help them make investment decisions (38 percent).
Lack of Confidence
Two-thirds (66 percent) of employees indicated that they have increased their focus on retirement goals in the past five years. However, most workers (85 percent) believe that they are not saving enough, and 60 percent believe it will be very difficult to save enough to support their standard of living in retirement.
This lack of confidence may be one of the reasons why 78 percent saw themselves working into their late 60s or 70s, up from 72 percent one year earlier.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Related SHRM Articles:
Pre-Retirees Save Nearly 15% of Pay, SHRM Online Benefits, May 2013
Match Thresholds and Default Rates Affect Savings, SHRM Online Benefits, May 2013
Plan Sponsors Focus on Retirement Readinesss, SHRM Online Benefits, May 2013
Financial Education – Stress = Improved Productivity, HR Magazine, June 2012
Health Savings Accounts Can Build Retirement Wealth, SHRM Online Benefits Discipline, October 2010
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