PLANSPONSOR - February/March 2018 - 10

Upfront
Participation Paves the Way to Success
AN ANALYSIS from The Pew Charitable
Trusts shows a correlation between access
to and participation in workplace-based
retirement savings programs and more
planning and saving.
Overall, workers with access to an
employer-sponsored retirement plan were
much more likely to report that they had
tried to figure out in the previous two
years how much retirement income they
would need (41%), compared with those
with no access (16%). Past participation in
a workplace savings program also is associated
with a greater likelihood of retirement
planning: Among workers who do
not currently participate, 30% of those
without access to a plan and 33% of those
with access but not participating report
that they plan for retirement. This is about
twice as many as those who have never
participated, regardless of access.
Even when accounting for other
worker characteristics, such as education,
race/ethnicity, gender, household
income, unemployment history and age,
those who have never participated in
employer-sponsored retirement plans are
much less likely to plan for retirement
than are those who have participated or
are currently participating. According to
John Scott, director of Pew's retirement
savings project, " Most do not determine
retirement savings need. A higher level of
education is associated with greater planning,
and men tend to plan more than
women-a disturbing finding given that
women tend to live longer than men. "
A history of plan participation appears
to play a role in the resources used. For
example, workers who have never taken
part in an employer-sponsored plan are
significantly less likely than those enrolled
currently or in the past to say they have
used a financial professional or automated
statements from financial providers. " They
also are much more likely to 'guesstimate,'
or make informal calculations. Moreover,
28% of those who have never participated
in an employer-sponsored plan have only
guesstimated, compared with 14% of
workers who have ever taken part and 8%
of those who currently participate, " the
report says.
Participants Use More
Rigorous Online Tools
Workers who have participated in a workplace
retirement plan use more rigorous
tools to determine retirement income
needs. For example, 58% of those currently
in a plan have used online tools or calculators
for that purpose, as well as 46% of
those who at some time have participated.
Thirty-nine percent of those currently
participating have used a financial professional
to gauge retirement income needs,
as well as 43% of those who at some time
have participated. Only 16% of those who
have never participated in a workplace
10 PLANSPONSOR.com February-March 2018 Art by Micky Walls
plan have used a financial professional
to that end. " Getting these resources into
workers' hands will very likely result in an
increase in their use, " Scott said.
Among those currently participating
in an employer-sponsored plan,
only 8% had stopped contributing or had
decreased their contributions, compared
with 45% to 52% of all others regardless
of current access or participation history.
Prioritizing Saving or
Paying Down Debt
To ask how workers would use a hypothetical
$10,000 windfall can help reveal
savings and spending priorities, Pew says.
" On average, those without access to a plan
would allocate $1,580 toward retirement,
more than those with access to a plan who
are not currently participating, possibly
because they cannot save at work. Workers
are more likely to use the money to pay
down debt or build liquid savings than to
boost retirement savings, which suggests
that these factors may be more pressing
concerns for many workers. "
" Paying down debt was the top
response for all survey participants, " Scott
notes. " Retirement savings should be
viewed in the context of workers' broader
financial situation. Policymakers may
consider combining retirement savings
[along] with help with other financial
priorities. " -Rebecca Moore
http://www.PLANSPONSOR.com
PLANSPONSOR - February/March 2018

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