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Despite Tepid Economy, Savings Commitment Stays Strong

By SHRM Online staff  10/3/2011
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Retirement plan participants in the U.S. during 2011 were more pessimistic about their economic expectations than a year earlier but, in general, had not decreased their participation in their employer's 401(k) plan, according to HR consultancy Mercer's 2011 Workplace Survey.

Interviews for the survey were completed with a national cross-section of 1,507 active 401(k) participants from June 16 through July 1, 2011.

Overall, participants had a gloomy economic outlook with a record number fearing job loss (45 percent, up from 36 percent in 2010) and planning to delay retirement (44 percent, up from 35 percent).

Typically, there is a direct correlation between economic outlook and retirement behavior. In 2011, however, despite deep economic concerns, participants seemed to be renewing their focus on retirement savings.

“In 2010, most participants saw the economy improving but not their own personal situation,” said Suzanne Nolan, partner and director of marketing and communications for Mercer’s U.S. outsourcing business. “This year’s results reflect a reversal in terms of a highly negative view of the economy but a renewed commitment to and accountability for their own retirement planning.”

Proof of this renewed focus on retirement savings was reflected in several data points from the Mercer survey. For example, 41 percent of participants said they had increased their 401(k) contribution rate during the past year (up from 31 percent in 2010), 40 percent reallocated existing portfolios (up from 33 percent) and 38 percent reallocated their future contributions (up from 29 percent).

In 2012, participants plan to contribute more to their 401(k) plans, and a slightly increased percentage expect to contribute the tax-deferred maximum (11 percent, up from 8 percent in 2010).

Eying Retiree Health Expenses

Health care costs in retirement seem to be playing a bigger part of retirement planning. In 2011, 36 percent of respondents identified saving for health care expenses in retirement as a major savings objective, up from 24 percent in 2010.

“We believe this increase in personal accountability among retirement plan participants is ‘good news’ for plan sponsors and their on-going efforts to increase employee engagement levels,” said Nolan. “Participants seem to be saying that they can no longer rely on market performance, their employer or the government to build their retirement savings for them, but must take control of every aspect they can in order to provide for a successful retirement. Employers and plan sponsors alike should see this as a unique opportunity to offer and promote tools and resources to assist participants in making informed retirement decisions.”

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