Plan sponsors will be heartened to know that not all the news is bad when it comes to retirement readiness: some studies find that retirement saving rates have been holding steady this year, with balances rising. On the other hand, significant gaps remain. Will 2024 be the year to close them?
Ready or Not?
An analysis of the behavior of over 5.3 million workplace savers points to some good news: about half of Americans plan to retire early or on time, despite continued uncertainty about how Social Security funds will benefit them. Additionally, the average retirement plan savings rate “has stayed steady at approximately 8% over the past year. Average account balances increased by 11% to $91,000 during that same period, which…was a welcome change from the 27% decline the prior year.”
Amidst the news that many Americans are confident about their ability to retire however, is sobering evidence that significant and persistent retirement readiness gaps require further attention:
- Men’s average account balances are 50% higher than women’s.
- Only 29% of Hispanic women consider saving for retirement a top goal, as opposed to 62% of Hispanic men.
- Close to half (43%) of Hispanic women are saving less than 3% or nothing at all.
- 29% of Black women feel less confident, more than double the rate of Black men (13%).
- Gen Zers are saving 43% less than Baby Boomers and have the lowest engagement rates, and 36% aren’t maximizing their employer-matching contribution.
- Gen Z is the only generation for which saving for retirement is not the top financial goal, as more Gen Zers prioritize paying off debt (37%) than saving for retirement (28%).
Action Steps for Steering Into The New Year
Headed into 2024, plan sponsors around the country are more and more focused on “total financial wellness,” as they roll up their sleeves on ways to address some of the financial concerns employees bring to work. These include addressing student loan debt, offering tiered and personalized investment options for the 401k, and expanding access to reasonably priced financial advice. Emergency savings, made easier to administer via SECURE 2.0, as well as Health Savings Accounts (HSAs) are also very much on the to do lists for plan sponsors.
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