A recent poll conducted by LIMRA, an association that provides research, consulting and other services to the financial services community, suggests that (contrary to popular opinion) many retirement plan participants may not object to plan contributions automatically increasing every year. In fact, the survey showed that 22% of defined contribution participants acknowledged that they would prefer that their contributions be automatically increased by 1% each year beginning at age 45.
Furthermore, the online survey found that 45% of those earning $75,000 or more in annual household income were more likely to want their contributions to be automatically increased by a full 2% or more every year. The poll also revealed that employees who make use of automatic plan features are more amenable to the concept of automatic escalation beginning at age 45. A full 54% want the contribution increase to be 2% or more each year. Only 34% of those polled do not want their employer to automatically increase their contribution rate at all.
A separate contribution escalation study conducted by AARP discovered similar results. AARP’s study found that 84% of automatically enrolled respondents had either a ‘very positive’ or ‘somewhat positive’ impression towards automatic contribution escalation.
Clearly, the message is that the perceptions that many employers hold concerning instituting automatic contribution escalation may be unfounded. Perhaps now, employees realize that they are often their own worst enemy when it comes to saving and they can benefit from putting their retirement on auto-pilot. Automatic contributions escalation is a simple way to increase the amount participants are saving each year.