Retirement plan participants think they should be saving more, but day-to-day expenses, debts, and other competing priorities get in the way.
Knowingly not saving enough
Since 2012, Lincoln has conducted the Retirement Power® Participant Study. Despite the fact that savings behaviors, balances, and spirits have improved during the past five years, the majority of participants still aren’t saving enough for retirement—and they know it. We asked each retirement plan participant how much he or she would need to save to be on track for retirement and compared that figure to the amount he or she is actually saving. The result: 60% of participants aren’t saving as much as they think they need to save1.
Financial priorities compete with retirement
Among participants who are saving less than they think they need, the top two reasons they aren’t saving more are “can’t afford to save more” and “have other financial goals that are more important.” These findings highlight a need for broader goal setting to address how much to save (which many participants already understand) and how to save more, while meeting other financial responsibilities and priorities.
How to achieve goals
Our research finds that participants who set goals are more likely to save more for retirement and more likely to feel confident about retirement—even in the face of competing priorities. The median deferral rate for participants who set a specific goal for how much they want to save for retirement this year is 12%, which is twice as high as the deferral rate among participants who have no goal for how much they want to save for retirement this year (6%).
Even when participants set a goal for one of their competing priorities, we still see a connection between goal-setting and higher retirement savings rates. Among participants who set a specific goal for how much debt they want to pay off this year, the median retirement savings rate is 10%, compared to 7% among those with no goal for how much debt they want to pay off this year.
Our research suggests that tools and messages, on the whole, are making an impact. Where participants need the most help now is figuring out how to save more.
1 Lincoln Retirement Power® Participant Study, 2017.