Missing the Mark

 A recent survey posed an intriguing question: Why are employees not participating in their 401(k)s? The answer(s) were jaw-dropping.

Now, I’ve previously expressed skepticism regarding workers’ perception of things like retirement savings needs, much less retirement savings balances, and over the years there has been plenty of anecdotal evidence to suggest that workers think they have a pension, despite plenty of actual data to indicate that’s a misguided fantasy. In sum, it seems that many, if not most, workers have a pretty distorted view of their financial circumstances, certainly as it relates to retirement.

That said, a recent survey by Principal takes that to a whole new level. 

That survey found that more than half — 59% — of workers who were not saving for retirement — thought they WERE saving for retirement. Nearly half (49%) thought they had been automatically enrolled, but nearly as many (41%) thought they had signed up on their own. And three-quarters (77%) said they had started saving as soon as they were eligible for the plan!

And if that wasn’t enough — turns out that while 83% say that they’d start contributing if they received a match ... 78% of those respondents are actually in plans that DO offer a match. Oh, and 70% of those who thought they were contributing (but weren’t) actually thought money was being deducted from their paychecks for that purpose.

Oy vey!

Some of this confusion might be a consequence of turnover — 40% said they had had more than one job in the past five years, after all. Let’s face it, it’s easy to lose track of things like benefit enrollment when you’ve changed jobs that often (or to assume that just because you were saving at your old job transferred to the new one). Some can doubtless be attributed to the industry’s growing reliance on automatic features — both by plan sponsors and workers — that lessens or eliminates the traditional need to be attentive to such things. Ultimately, a big part of it is likely nothing more than a combination of both the complexity of the process and the “distractions” of daily life.   

Now, I’m not quite sure how to remedy the passivity of those relying on their employer to sign them up, much less the myopia of individuals who aren’t even paying attention to the deductions on their paystubs. Maybe we should start mailing out statements to non-participants that showed a $0.00 balance (in red) that confirms their lack of an account — though my guess is they’d just file it away. 

Whatever the reason(s), this survey suggests that messages about the importance of saving for retirement — much less saving more — are likely going right over the heads of people who seem to think they already are. 

And in that sense, this survey also suggests that OUR assumptions about the efficacy and impact of our communications in inspiring better efforts — could be missing the mark as well.

- Nevin E. Adams, JD