Opinion

Employers Can Change America’s Retirement Savings Future and It Doesn’t Have to Cost a Thing

How much to save for retirement is one of the most important financial decisions in a person’s life.  Yet, more than half of Americans aren’t saving enough, or even at all, for retirement.

The good news is that simple, innovative and available financial tools exist to help workers save more for their retirement years.  So how can we better use these tools? “Save 10”.

“Save 10” is a new initiative, being led by some of the best employers in the country, which seeks to improve the current saving trends by encouraging employers to help their employees save at least 10 percent of their income.  While the “optimal” savings rate differs by individual, 10 percent is a reasonable and simple target.

Save 10 program is simple in how it operates. Save 10 recognizes employers who help their employees save at least 10 percent of their income through automatically enrolling employees in existing retirement savings programs and automatically increasing contributions over time.  Research shows these simple steps significantly increase participation in retirement savings programs, and they are available at nearly no cost to the employer.  Employees may also “opt-out” of the automatic enrollment or increases, if they choose.

Save 10 is a business to business effort that seeks to engage more employers with these efforts, and it does not impose any real additional burden on them or the government.

Auto enrollment works because once in a savings program, employees tend to stay in the program. Automatic increases (or escalation) allow employees to gently increase savings over time rather than feeling “sticker shock” by trying to make large contributions later in an effort to “catch-up.”

Automatic escalation of savings is especially attractive if the saving increases are synchronized with pay increases to prevent a reduction in take home pay.  University of Chicago Professor Richard Thaler and Shlomo Benartzi of UCLA report that one midsize manufacturing firm successfully increased employee savings rates from 3.5 percent to 13.6 percent in about 4 years using auto enrollment and auto escalation.  Employers can have a profound positive effect on savings rates by simply adjusting the enrollment settings of their existing retirement plans.

Plus, providing retirement benefits to employees is just good business.  Desirable retirement savings plans help employers attract and retain top talent, and encourage productivity in the workplace by demonstrating employees are valued by a company that is interested in their future. Attractive savings and retirement plans are far more important than some of the criteria reflected in various “best business rankings”, such as complimentary food in the kitchen, free yoga, and other highly publicized fringe benefits recently reported by major tech companies.

Being recognized as a Save 10 employer will provide recognition for businesses committed to the financial security of their employees.  A number of prominent businesses and nonprofit organizations are leading the way as early ambassadors for Save 10, and their employees have the opportunity to be well on the path towards security in retirement.

Employers can play a crucial role in helping their employees and our country be better prepared for retirement. By joining the Save 10 movement, businesses will affirm that saving for retirement is critical and that providing adequate retirement planning support is one of the most important human resource decisions a business can make. 

Save 10 is an opportunity for businesses to individually and collectively improve industry practices relating to retirement support.  Save 10 is simple and it is based on sound, proven financial principles. If companies join Save 10, we can improve retirement security for millions of Americans.

Visit Save10.org to be a part of Save 10.

 

Gov. Tim Pawlenty is the President & CEO of the Financial Services Roundtable. The Financial Services Roundtable represents the largest integrated financial services companies providing banking, insurance, payment and investment products and services to the American consumer. Learn more at FSRoundtable.org.

 

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