BALTIMORE, Jan. 23, 2020 /PRNewswire/ --
NEWS
Individuals who participate in 401(k) plans are more confident
about their retirement than those who do not participate, according
to a recent study focused on financial attitudes and behaviors
conducted by T. Rowe Price. The
5th annual study, "Retirement Savings and Spending,"
found that regardless of income and assets, preretirees aged 50 and
older who participate in a 401(k) plan are 16% more likely to be
confident about their retirement than those who do not
participate.
"Our findings support that a 401(k) plan is a game-changer in
terms of shaping healthy financial behaviors as well as ultimately
resulting in more financially confident individuals," said
Sudipto Banerjee, vice president of
retirement thought leadership at T. Rowe
Price. "These plans provide a structure that encourages
saving by allowing people to pay themselves first. We believe that
401(k)s are an important, foundational first step toward a
successful retirement."
KEY FINDINGS
- Regardless of household income, individuals with access to
401(k) plans save significantly more. Among low income
households making $25,000 or
less, 401(k) participants saved 10 times more on average than
their peers without access to a plan and 20 times more than those
who have access but choose not to participate.
- Eligible nonparticipants are worse off than people without
access to a 401(k) plan. Plan participants have a median
household asset balance of $172,000
compared to the median of $7,000 for
workers without plan access. Eligible nonparticipants have a median
asset balance of $2,000.
- 401(k) plan participants report higher progress toward major
financial objectives. Plan participants are more likely than
eligible participants to report higher progress toward a variety of
financial objectives such as reducing student loans (72% and 38%,
respectively) and saving for emergencies (73% and 41%,
respectively). Additionally, plan participants are twice as likely
to save for retirement via traditional IRAs or other accounts.
"We believe that employer savings plans like 401(k)s can help
provide a foundation for long-term savings for people who wouldn't
normally do so on their own. Those who don't have access bear more
responsibility to seek other ways to save for retirement. We were
pleased to see policymakers pass the SECURE Act because it will
make the 401(k) a more widely available option for employers. We
believe all workers should feel confident and look forward to their
retirement," said Kevin Collins,
head of Retirement Plan Services at T. Rowe
Price.
Retirement Plan Sponsors, consultants, advisors and service
providers can align plan designs with employee behavior to maximize
budgets and outcomes. They can add auto-increase defaults and
provide tools to track progress for current participants and
provide access to debt management tools to eligible
nonparticipants. Plan sponsors should also consider the integration
of financial wellness programs which provide tools and resources
that can educate and empower individuals to take small but
purposeful steps toward long-term financial success.
Plan participants should try and save at least 15% of their
income and take advantage of employer matching contributions.
Eligible nonparticipants should prioritize paying off high-interest
debt, establish emergency savings and participate in a 401(k)
savings plan.
ABOUT THE STUDY
The findings are based on a national study of 3,016 retirement
plan participants, 250 eligible non-plan participants, and 603
individuals without access to workplace savings plans. T.
Rowe Price worked with NMG
Consulting to conduct the survey online from June 13, 2019 to June 25,
2019. This is the fifth edition of the study, following the
2014, 2015, 2017, and 2018 installments. The first phase of the
2018 study focused on financial advice, the second phase focused on
retirees, and the third phase focused on gender. Data from prior
studies is used in this report for comparison purposes.
For more information about the study please contact Sudipto Banerjee at
Sudipto.Banerjee@troweprice.com or 410-577-5758 or 443- 204-0662
(c).
ABOUT T. ROWE PRICE
T. Rowe Price (NASDAQ-GS: TROW)
is an independent global asset management company focused on
delivering investment excellence and retirement services for
institutional and individual investors. Our strategic investing
approach, driven by independent thinking and guided by rigorous
research, helps clients feel confident in pursuing financial goals.
We have more than a trillion dollars and support more than 2.2
million workplace retirement savers. T. Rowe Price was founded more than 80 years ago
upon a philosophy of putting clients' interests first, and our
Retirement Plan Services business unit has more than 30 years of
experience developing solutions for retirement investors. For more
information, visit troweprice.com, Twitter,
YouTube, LinkedIn, Instagram, or
Facebook.
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SOURCE T. Rowe Price Group, Inc.