There is new evidence that
employers can help persuade even their most stubborn employees to save more for
retirement.
When the State of North
Carolina’s retirement division sent email “nudges” to older public employees
taking part in its supplemental savings plans, those workers were more likely
to reassess their savings strategies or increase their contributions, according
to the findings of a working paper by the National Bureau of Economic Research.
The results suggest employers can
have an impact on employee retirement beyond simply offering savings plans such
as 401(k)s and 457s.
Even though companies leave
retirement savings plans to outside vendors like Prudential Financial Inc.
and the Vanguard Group, it is important for employers to encourage workers to
periodically reassess their retirement security, says Robert Clark, a professor
of economics and management at North Carolina State University and one of the
study’s authors.
“Encouraging workers to be
prepared for retirement is certainly in a company’s interest,” says Mr. Clark.
“An employer obviously wants satisfied workers as well as satisfied retirees.”
As private employers have shifted
away from traditional pensions, Americans are less prepared for retirement.
Financial experts advise individuals to save eight to 11 times their annual
incomes to maintain their standard of living in retirement, but the average
working household has virtually no retirement savings, according to the nonprofit
National Institute on Retirement Security.
The median retirement account
balance for all working-age households is $3,000; for near-retirement households,
it is $12,000.
The experiment, conducted in
2014, involved a sample of 14,710 active workers 50 through 69 years old, a
demographic seen as set in its ways and harder to nudge, the paper says. Some
messages emphasized the benefits older workers derive from increased retirement
savings. Others pointed out that income from social security and employer
pensions may not cover unanticipated health conditions.
Results showed workers who
received the emails were more likely to change their contributions, increasing
them at a rate of 2.8% in the short-term compared with 1.8% for the control
group.
The research builds on earlier
studies showing that nudges can change people’s behavior, such as helping
patients manage chronic diseases.
Reaching out to employees around
career milestones like a big raise or a promotion is an easy, low-cost way to
help workers prepare for the future, Mr. Clark said.
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