A recent survey by TIAA-CREF shows that nearly 36% of Americans who contribute to an employer-sponsored retirement plan have never increased the percentage of their salary that is dispensed to their company sponsored retirement plan. On top of this group, another 26% of workers have not upped their contribution in more than a year.
What do these statistics mean for the average worker? Well, in reality, workers are losing out hugely. This is especially evident as 44% of American employees save 10% or less of their annual income, which means that though they are saving for a rainy day or retirement, they are not maximizing their long-term gains.
But knowing that gains are being lost out on is not enough to urge employees to contribute. The first way to battle this is to offer automatic enrollment for employees. Automatic enrollment makes it easier for employees to contribute. In a case study, it was determined that 25% of those polled said they did not increase contributions because they were already contributing the maximum amount to their retirement plans.
Teresa Hassara, executive vice president of TIAA-CREF’s Institutional Business, has indicated that auto-escalation, or the ability for employees to contribute more automatically after a raise, would overcome “employee inertia.â€
Contributions to retirement plans vary by the age of the employee, but one thing is certain: The best way to stave off this inaction or employee inertia would be for companies to work closely with their plan sponsors and look for more automated services.