While employees expect their defined contribution (DC) plan to be a key vehicle for funding their retirement, most are worried their retirement savings will not be enough to cover their expenses, according to new research from Buck. 
To gain insight into employees’ satisfaction with their retirement benefits, Buck commissioned an independent research firm to survey benefits-eligible employees and HR and benefits professionals who administer retirement plans, allowing for a comparison between employee and employer responses.
It found that while roughly 8 in 10 (79%) employee respondents are satisfied with their retirement benefits, only 27% are confident that they’ll be able to save enough to cover their expenses in retirement.
According to Buck, this may be because, for many employees, retirement is a concern for the future and therefore not front and center as they handle day-to-day expenses. In fact, 76% of respondents have increased concerns about their capacity to save for retirement. More than a third (35%) of employees cited the rising cost of living expenses as the top impediment to saving, followed by personal debt (20%) and family obligations (11%).
Top Benefits
Employees were also asked to identify the top three benefits they look for when considering a new job. The findings show they care almost equally about their retirement benefits (65%) and medical coverage (67%), followed by dental insurance (36%) and flexible schedules (33%). Employers recognize this, but think medical coverage is a more significant consideration (77%), with retirement benefits second (70%), followed by flexible schedules (36%) and dental insurance (32%).
Still, as a sign that employees are more focused on their immediate cash needs, more than half (53%) preferred a $500 pay increase over a $500 increase in contributions made to a retirement plan. Moreover, 79% of employees would like their employer to offer supplemental savings accounts, such as emergency savings, in addition to retirement benefits.
Perhaps even more significant is the difference in how competitive employers and workers believe their retirement package is. Nearly all HR professionals (91%) believe their organizations offer competitive retirement packages, though 61% of employees believe they could find a better package with a different employer.
“With rising inflation, it's not surprising that employees are concerned about their ability to save for retirement and this, in turn, is reflected in the perceived value of employer-sponsored retirement plans,” said Tonya Manning, U.S. Wealth Practice Leader and Chief Wealth Actuary at Buck. “DC plans have evolved to become the primary retirement savings vehicle for Americans, and for plan sponsors, the challenge is how to help participants reach their savings goals.”
Revisiting Retirement Benefits?
Still, despite new legislation, retirement benefits have remained largely unchanged. According to the findings, nearly half (46%) of employers say their retirement package has remained the same in the past two years, and 39% of employees agree.
That said, 57% of employers indicated that they offer, or plan to offer, matching retirement contributions for student loan payments, a provision included in the recent SECURE 2.0 legislation. Notably, the same number of employees (57%) indicated they would like to see this enhancement.
Increasing the company match is viewed as the best way to improve retirement plans by both employees (52%) and employers (49%). Employees and employers were also in agreement regarding other top focus areas to improve retirement benefits, which included improving or offering a pension plan and offering more investment options.
Some employers (28%) think that increasing education and communications could help to improve their retirement benefits. For employees, the most confusing parts of their retirement plan are withdrawal options, followed by investment options, and plan fees and expenses. Additionally, the findings show that nearly 4 in 10 (39%) employees are unsure if they contribute the required percentage of their annual compensation to receive the full company match, suggesting that more employer communications may be needed.
“The good news is that employees are aware that their contribution to their retirement plan is key to a successful outcome,” says Manning. “However, with today's financial stressors, it's critical that plan sponsors regularly assess what policies or strategies are in place to increase retirement plan participation, drive savings rates higher, and improve participant investment outcomes.”
The findings are based on a survey of 344 employees with retirement benefits and 200 HR and retirement professionals. The research was conducted in late July through August 2023.
The findings are published in Buck’s survey report, Saving for retirement: Employee and employer attitudes towards retirement benefits.
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