Across America, millions of people juggle student loans, credit card debt, and other financial prioritiesExcerpts from the new Lincoln Financial study, Understanding Savings Behaviors And Motivators. Read the full report here.
For the past several years, the study has shown a steady rise in positive outcomes and spirits. However, the 2019 study revealed a different story. While the key indicators of success, deferral rates and account values, held steady, optimism showed a marked decrease. In addition, a majority of employees have debt, and, of them, roughly 2/3 indicate that it’s a problem. The result? A majority of participants are saving less than they need.
Beyond surveying employees’ attitudes toward retirement saving, the research also revealed key ways to motivate employees to increase retirement plan contributions or to start saving. From providing easy-to-use online tools to offering an employer match, educational resources and plan design features can have a major impact on retirement savings outcomes.
Participants Are Less Optimistic
In a trend reversal, the 2019 survey revealed that participants feel less optimistic and more overwhelmed. From 2017 to 2019, the percentage of participants who feel optimistic about their retirement savings dropped from 55% to 45%, and the percentage of participants who feel overwhelmed increased from 19% to 28%.
Participants Are Determined to Save
Despite the uptick in negative emotions around retirement saving, participants’ contributions and account values are roughly the same as in 2017. In fact, the recent survey reveals that 19% contribute the maximum allowed within the plan, and more than half contribute 10% or more. When it comes to account values, there’s more good news. In 2012, only 10% of participants had account values greater than $250,000; today, that percentage has risen to 23%.
Drowning In Debt
When it comes to saving for retirement, debt continues to be a significant challenge. In fact, 86% of participants and 84% of non-participants have debt, and 63% of participants and 71% of non-participants say that it’s a problem. This year, respondents indicated that credit card debt surpassed mortgage debt as the most prevalent category of debt. Clearly, there is a student loan quandary: while people of all ages struggle with debt, millennials and Gen Z are particularly hard-hit by student loans.
According to the Federal Reserve and the Federal Reserve Bank of New York, more than 44 million borrowers in the United States alone collectively owe more than $1.5 trillion in student loan debt. Even more distressing, 11.5% of student loans are 90 or more days delinquent or in default.
Echoing the enormity of this issue, our study revealed that the median age when employees expect to pay off their student loans is 40.
Managing competing priorities
Both participants and non-participants (of all ages) struggle to balance competing financial priorities, including paying down debt and saving for the future. Notably, 93% of participants and 87% of non-participants are currently saving for something other than retirement, such as an emergency fund, a vacation, home improvements, a house, or a car.
The study also showed that caregiving responsibilities hamper time and finances, with 23% of participants and non-participants saying they have some type of caregiving responsibility. As the baby boomer generation ages, caregiving responsibilities will likely grow even more prevalent.
Retirement Saving Is Low On The Priority List
Faced with many pressing priorities, both participants and non-participants tend to put retirement saving on the back burner. In fact, 40% of participants and 54% of non-participants say “With so much going on in my life, saving for retirement typically falls to the bottom of my priority list.”
Read the full report, Understanding Savings Behaviors And Motivators, here