Employees are finally starting to come around to retirement savings tactics they had seen as intrusive and sneaky just a few short years ago.
Those steps are automatically enrolling employees in the company’s 401(k) and then automatically bumping up their contribution percentages on an annual basis (aka, auto-escalation).
That’s according to a recent study by J.P. Morgan.
The best way to bolster 401(k) participation is through automatic enrollment, and now you can make such a move and be confident it won’t rub employees the wrong way.
In fact, 75% of employees said they fully support automatic enrollment, according to J.P. Morgan.
Plus, 96% of employees will actually thank you for taking such a proactive step, and just 1% of employees will opt out after being automatically enrolled. And best of all: Nearly a third (30%) of employees said they never would have enrolled in the plan if it hadn’t been for automatic enrollment.
Of course, getting employees signed up is only half the battle. Employees will never be able to save nearly enough for retirement if they remain mired in the default contribution rate they are automatically enrolled in.
That’s where auto-escalation comes in. Traditionally, employees have been even more opposed to this feature than auto-enrollment.
But that too appears to be changing. The study found 75% of folks support auto-escalation, and 97% reported they were happy their employers added the feature to their plans.
While these findings are good news, most experts agree the standard open enrollment and escalation tactics don’t go far enough.
For example: The average plan will auto-enroll folks at 3% of their salary and automatically increase that amount by a percent each year. That starting point puts workers behind where they should be.
A stronger structure (according to retirement industry experts): Start staffers at 6% and bump contributions up annually until they hit 10%-15%.