Most employees want their contributions to their defined contribution (DC) retirement plans escalated annually once they hit age 45, according to a new survey.
The online survey of more than 300 consumers who participate in or have access to a DC plan found that 38 percent were automatically enrolled in their DC plans; 21 percent had automatic escalation and 16 percent had both automatic enrollment and escalation, according to a survey by Windsor-based LIMRA.
"The message to employers is: don’t be shy about implementing an automatic escalation option in your DC plans," said Marie Rice, corporate vice president and director of LIMRA’s Retirement Research. "Employees understand they need to boost their retirement savings and automatic escalation is a simple way to increase the amount they are saving annually."
When posed with the idea of an auto escalation beginning at age 45, 22 percent of employees said would like the increase to be 1 percent every year; however, 45 percent would want their contributions to be automatically increased by 2 percent or more every year. This was especially true among those who earn $75,000 or more in annual household income.
Recent LIMRA research indicates that the majority of pre-retirees (age 55-70) are ill-prepared for retirement; only 30 percent consider themselves to be very prepared for retirement.
The survey found 15 percent of employees increased their contribution rate in the past year (excludes those enrolled in auto escalation plans). And, 42 percent of employees have never changed their DC investment line-up (especially true of 25-45 year olds).
"Clearly, employees need help getting their savings rate to the level needed to meet their retirement goals," said Rice. "This study shows that employees want automatic escalation to improve their retirement outlook."
