Employee-centric retirement benefits.
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Introduction
This study is an in-depth analysis of the needs and expectations of the American workforce. We’ve entered the era of employee-centric retirement benefits.
Key takeaways:
- 83% want full plan portability, it's the most important improvement employees want from their plan, the friction of rollovers is causing $92 billion in annual cashouts.
- 96% of employees want to save for retirement through their employer. People of all incomes place a high value on having access to a workplace retirement plan.
- 80% of employees want more personalization in investments including portfolios tailored to their needs.
- 70% of employees and 73% of businesses prefer not to use a state-run plan to meet their state retirement plan mandate.
- 80% of employees would prefer a cash bonus instead of a match. People want more discretion on prioritizing their financial wellness needs.
Summary
Americans shoulder 100% of the responsibility and the risk for their own retirement saving success, they rely on the retirement savings plans offered through their workplace to help them shoulder this burden.
In turn, companies rely on the retirement industry to deliver solutions to help their employees and meet the companies business needs.
The question that needs to be answered is: How is the current retirement system performing and is it meeting the needs of the people it was set up and designed to benefit?
The 2022 Icon Retirement Trends Study addresses this topic directly.
The study was designed to accomplish several objectives:
- Establish what employees want and need from their workplace retirement plan.
- Understand how the current system impacts behavior and savings outcomes.
- Identify opportunities to improve the current system.
The story in numbers:
81 Million
Workers don’t have access to a workplace retirement plan.1
$2,500
Median retirement savings balance for all working-ages.2
$14,500
Median retirement savings balance for pre-retirees ages 55-64.2
35 Million
1099 workers are shut out from 401k plans.4
$1.3 Trillion
Assets lost when people leave their job, become disconnected from their plan and end up losing track of where it is.5
$92 Billion
Assets cashed-out of 401k plans every year at job-change because plans are not seamlessly portable.3
- economicpolicyresearch.org/images/docs/research/retirement_security/Research_Note_1_2020_Retirement_Plan_Coverage_by_Industry_Firm_and_Worker_Characteristics.pdf
- nirsonline.org/wp-content/uploads/2017/07/final_rsc_2015.pdf
- ebri.org/content/the-impact-of-auto-portability-on-preserving-retirement-savings-currently-lost-to-401(k)-cashout-leakage
- statista.com/statistics/918285/gig-economy-number-people-working-independently-frequency-us
- hicapitalize.com/resources/the-true-cost-of-forgotten-401ks
Background
Fifty years ago, the 401k plan was created as a supplemental plan to a pension. These plans were initially used by large corporations and were never meant to be used as a one-size fits all solution for the entire US workforce. Consequently, most businesses don’t offer a 401k. In fact, of the 6,155,000 businesses with 5 or more employees in the United States, there are currently only 600,000 which offer a 401k plan. That means 81 million people don’t have access to a workplace retirement savings plan.
Because 401k plans were modeled on pensions, they have structural bugs that prevent millions of businesses of all sizes from offering a plan.
- When offering a 401k plan, the employer becomes a fiduciary to their employees. This has led to a wave of lawsuits where employees sued their employer.
- 401k plans place an enormous compliance and regulatory burden on employers that can drive-up plan costs.
- Smaller plans are more expensive than large plans. In fact, participants that work for a small employer pay double the cost to invest.
- 401k plans are not seamlessly portable. This problem has plagued the industry for years as an alarming amount of money is cashed out every year due to job-change and rollover friction.
Download the report to learn more about:
- The factors that build trust and engagement with retirement benefits
- What plan features are most important to employees
- How to help reduce financial stress
- How employee-centric benefits improve outcomes
About Laurie
Laurie Rowley is a social entrepreneur dedicated to building companies that improve financial security. She is Co-Founder and President of Icon, the country’s first universal retirement plan. She also is the founder of several successful companies including NARPP and N-Labs, where she still holds board positions. She has a background in behavioral finance and research having helped launch the Behavioral Finance Forum. She is widely regarded as an expert in financial decision making, human-centered design and strategy.
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