Personal Savings Shortfall Points Up Need For Automatic Enrollment in 401(k)S
Source: AARP Press Center | April 4, 2006
A new national survey shows many Americans have accumulated only modest retirement savings, thus emphasizing the need for workers to have automatic enrollment in 40l(k)s, AARP said today. A provision to better facilitate automatic enrollment is included in the pension reform legislation currently under consideration in a House-Senate conference.
The 2006 Retirement Confidence Survey (RCS) found that more than two-thirds (68 percent) of current workers say that they and their spouses have accumulated less than $50,000 in retirement savings.
The annual survey was sponsored by the Employee Benefit Research Institute (EBRI), Mathew Greenwald & Associates, a survey research firm, and is underwritten by AARP and other organizations.
AARP noted that the survey found strong support for automatic enrollment for new workers in order to boost participation in a retirement plan: about two-thirds (69 percent) of employed workers favor automatic enrollment. Nearly as many (65 percent) back automatically increasing the percentage of salary contributed when a pay raise is received, AARP noted.
"Automatic enrollment is the right proposal at the right time," said David Certner, AARP’s Legislative Counsel and Legislative Policy Director. "It will be a real shot in the arm for workers who need to save for retirement at a time when defined benefit pensions are disappearing."
Certner noted that the Congressional pension conference is also considering a provision that would extend the Saver’s Credit through 2008; this provision encourages savings by low and moderate income individuals through a tax credit.
AARP supports the Senate version of the pension bill in part because it includes protections for millions of older workers from having their pension benefits erode dramatically when their employers switch from traditional defined benefit pensions to cash balance plans.
In February, AARP—along with a coalition that includes the Heritage Foundation and the Retirement Security Project—endorsed a proposal for automatic IRAs in the workplace.
The RCS survey released today not only shows modest retirement savings, but also indicated that many Americans underestimate the share of their preretirement income they are likely to need in retirement, and have made no estimate of how much they will need to live comfortably once they retire.
Still, 24 percent of survey respondents said they are very confident that they will have enough money to live comfortably in retirement and another 44 percent said they are somewhat confident. The total of more than two-thirds (68 percent) of current workers expressing some level of confidence in their retirement prospects was statistically unchanged from last year’s survey, but that finding came in the face of a recent series of widely-publicized announcements of companies ending or limiting their traditional pension programs and retiree health promises.
The RCS was based on 21 minute telephone interviews with l,252 individuals age 25 and older in the United States. The interviews were conducted in January. The margin of error for the overall survey is plus or minus three percent.
EBRI is nonpartisan, does not lobby and does not take positions on policy questions.
AARP is a nonprofit, nonpartisan membership organization that helps people 50+ have independence, choice and control in ways that are beneficial and affordable to them and society as a whole. We produce AARP The Magazine, published bimonthly; AARP Bulletin, our monthly newspaper; AARP Segunda Juventud, our bimonthly magazine in Spanish and English; NRTA Live & Learn, our quarterly newsletter for 50+ educators; and our website, AARP.org. AARP Foundation is an affiliated charity that provides security, protection, and empowerment to older persons in need with support from thousands of volunteers, donors, and sponsors. We have staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.
