Americans are Saving More for Retirement. Is It Enough?

There is good news about retirement savings rates for Americans.   Annual savings rates have increased 10% from 2010 to 2015, to an average of 6.8%. [1] Americans are gradually inching up their contributions and it’s likely due to a number of factors.

We’ve benefited from an improved economic and market conditions since the financial crisis of 2008.  Americans are benefiting personally from low unemployment, better paying jobs and more education about retirement savings needs.  However, the most significant factor to improved savings rates may be the automatic enrollment feature that nearly 60% of employers now use for their 401(k) plans. [1]

Automatic enrollment is making a big difference.  Recent studies suggest that the average participation rate in plans that offer auto-enrollment is 89%.  That’s significantly more than plans that don’t auto-enroll, which show participation rates at just 75%.  Employees are saving more in plans that auto-enroll, too.  These employees save on average 7.2% annually versus just 6.3% for those in plans that don’t auto-enroll. [2]

The automatic concept doesn’t stop at the plan entry date.  More employers are taking it a step further to automatically increase employee contributions, known as auto-escalation, by 1% or 2% each year.  Most employers set a cap to the increases, such as 10%.

Retirement experts suggest that most Americans need to strive to save 10% – 15% on average each year, including any employer contributions.  Auto-escalation may be one of the most important features in finally helping Americans achieve these retirement savings rate goals.

For more information about how auto-enrollment and auto-escalation may help your organization’s retirement plan savings rates, please contact Olson Wealth Group at (952) 835-1797.

Gina Buchholz , LPL Registered Administrative Associate

Securities and advisory services offered through LPL Financial, a registered investment advisor.  FINRA/SIPC


1 Plan Sponsor Council of America

2 Investment News

Copyright: Olson Wealth Group 2017

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