June 2018

Are Your Employees Saving
Enough for Retirement?

A Rigorous Review of Savings
Patterns Can Reveal Hidden Problems

Most organizations monitor their overall defined contribution (DC) plan participation. This standard periodic review may paint a pleasant picture, such as, “Eighty-three percent of your employees participate in your DC plan. The average employee saves 6.2 percent of his or her salary. That’s up from 5.5 percent last year.” That sounds encouraging. Yet aggregate statistics can mask problems that undermine an organization’s efforts to help employees prepare for their own retirement. A closer look into the data — especially employee savings patterns — can expose hidden problems that may even affect organizational productivity and success.

A more rigorous review of employee savings patterns might reveal, for example, that for every employee who saves 9 percent or more of his or her salary, another saves less than 4 percent. It might also reveal that 17 percent have not saved anything in the past year. For an organization with 1,000 employees, nearly 200 are failing to prepare for retirement. Equally troubling, if the employer offers a match, those same non-participating employees are throwing away a valuable benefit. Identifying such patterns provides opportunities to help mitigate, or possibly eliminate them, thereby maximizing employees’ opportunities to achieve retirement readiness.

The most problematic common retirement savings patterns, which may be hidden from view, include not saving at all, not saving enough to get the match, not saving enough to retire, not saving consistently and “leakage” (i.e., withdrawing money before retirement). The case studies below discuss two of the more common “hidden patterns” that can sabotage future results — failing to save enough to get the full match and disengaged employees who are not contributing enough to ensure their retirement readiness.

Consistency Is One Secret to Success

Consistent saving at a rate that is at least enough to get a full match is the pattern that provides the best start toward having sufficient resources at retirement. As shown below, a recent analysis by the Employee Benefit Research Institute (EBRI) shows the importance and impact of ongoing 401(k) plan participation. At the end of five years, those who contributed each year had average account balances that were almost double the average balance for all participants.


Average Account Balances: All Participants vs. Set of Consistent Participants 2010 – 2015


Source: Sarah Holden, Jack VanDerhei, Luis Alonso and Steven Bass, “What Does Consistent Participation in 401(k) Plans Generate? Changes in 401(k) Plan Account Balances, 2010 – 2015,” EBRI Issue Brief, October 24, 2017.


Case Study #1: Financially Stressed Employees Are Not Saving Enough

A Midwestern medical devices manufacturer with approximately 8,000 employees asked Sibson Consulting to perform a Strategic Analytics study on its DC plan to help determine if their employee population was on track to be retirement ready. When Sibson broke down the plan participants into various subgroups by generations and departments, it was surprising to learn that one group significantly lagged the others. Only 54 percent of Millennials in Department 2 were saving enough of their salary to receive the full employer match.


Percent of Employees Receiving Full Employer Match


Source: Sibson Consulting, 2018


This problem was not apparent from the aggregate data. Moreover, it was quite unexpected since the plan included auto-enrollment for new employees at a high enough level to ensure they would get the full match; the employees who were not saving enough had actively elected to decrease their savings percentages.


Are Your Employees Leaving Money on the Table?

Americans have $24 billion in unclaimed 401(k) matches each year.

Source: Missing out: How much employer 401(k) matching contributions do employees leave on the table?, Financial Engines, May 2015


Employee interviews revealed that some employees in Department 2 had reduced their savings because of near-term urgency for their limited discretionary income. Many had costly student loans and/or wanted to save for a down payment on a home in an expensive housing market. Although these employees recognized the importance of saving for retirement, other needs and expenses took precedence.

Once the organization identified the cause of the problem, it worked with Sibson to develop a set of solutions that helped increase retirement savings:

  • Advocate for the plan. First, the organization launched a communication campaign to educate employees about the DC plan’s benefits. One example was publicizing recent design enhancements (e.g., fee reductions) to encourage participation. It also promoted measures to re-engage employees who were no longer participating (e.g., re-enrollment).
  • Communicate individually with employees. The organization began to connect one-on-one with employees. It also distributed personalized retirement readiness statements with accumulated asset balances and projected future monthly income to demonstrate savings in a way participants could understand.
  • Discourage employees from borrowing against their retirement savings. The organization took steps to ensure that employees considered all other options before they reduced their DC plan savings to cover their expenses. This included paying for a consultation with a financial advisor who offered advice on financial planning and other topics to ensure full financial wellness. The organization also explored offering alternative liquidity vehicles (e.g., low-cost loans outside of the plan).

Case Study #2: Improved Engagement Is Linked to Higher Retirement Confidence and Savings

A West Coast software developer with 4,500 employees knew their participants’ DC plan savings were not only on the low side, but had fallen conspicuously over the past few years, despite the organization’s efforts to encourage participation. Some employees had not saved anything. When Sibson conducted an in-depth analysis of the plan including an employee engagement survey, we found a link between the low level of retirement plan engagement and an overall decline in employee engagement.

What does employee engagement have to do with DC plan savings rates? A national study of 1,000 active DC plan participants by the global investment management firm BlackRock and Boston Research Group found a fundamental relationship between an organization’s financial benefits and employee engagement.1 Even more interesting, it discovered that DC plans drive employee engagement:

The research results show not only correlation, but a clear causal relationship between financial benefits, financial wellness and employee engagement with the employer. The more connected individuals were with retirement planning, and the better understanding they had of their plan’s design and the DC plan benefit, the higher their engagement with the employer. That is, the research found that the DC plan is a proven driver of employee engagement, in that it is a manifestation of a company’s values, concern and reward culture.

Another BlackRock survey found a strong link between employees’ retirement confidence and DC plan engagement.2 It noted that:

Participants who described themselves as confident about their retirement future were far more engaged with their plan (i.e., actively taking steps to get the most out of their DC plan) than those self-described as lacking confidence.


Plan Engagement Drives Retirement Confidence Level


Source: Warren Cormier, Allegra Heyligers and Larraine McKinnon, “The DC Plan’s Effect on Participant Engagement,” NAPA Net the Magazine, Fall 2013. Statistics are from the BlackRock 2012 Annual Retirement Survey.


While employees in the 2018 survey were more confident about retirement than in the 2012 survey (largely due to improved investment returns), about 40 percent of plan participants still did not think they were on track to retire with the lifestyle they wanted.


Should You Be Using Behavioral Economics?

One important tool organizations can use to improve retirement plan savings is behavioral economics, which can help employees avoid suboptimal decisions about savings rates, investment selections, in-service withdrawals and distribution elections. For more information, see “Using Behavioral Economics to Encourage Employees to Make Better Decision about their 401(k) Plans,” by Sibson’s Christopher Goldsmith and Stewart D. Lawrence.


Because studies show a strong correlation between engagement and productivity in the workplace, increasing employee engagement should be a strategic priority.3 Improving engagement is, however, a major undertaking that must involve every facet of the organization, including retirement benefits. In addition, Sibson has found that improving retirement readiness improves retirement confidence, which improves employee engagement.

Employees who know where they stand on the track to retirement tend to be more engaged. Organizations that use targeted approaches to help employees improve their retirement readiness also improve engagement.

For example, the National Business Research Institute (NBRI) details several factors — including clarity, control, credibility and congratulations — that contribute to an employee’s engagement levels.4 Sibson approached the West Coast software developer’s DC plan with this in mind. With our help, the organization took several DC plan-related actions that improved 401(k) savings and contributed to improving employee engagement (see the table below).


Actions that Will Bolster 401(k) Savings — and Improve Employee Engagement
  Clarity Control Credibility Congratulations
Employee Issue Employees want to understand the goals that leaders have for the organization Employees feel more engaged when they are involved in the decision-making Employees want to be proud of their jobs and the organizations for which they work Employees value immediate positive feedback when their individual performance has been strong
DC Plan-Related Action Create clear pathways and demonstrate how savings affect employees’ retirement goals Provide tools and offer training courses Draw on the trust of the organization to help encourage positive savings behavior Communicate favorably when participants take specific positive action or attain certain goals (e.g., increase their deferral percentage or defer sufficiently to receive the full match)

Source: Sibson Consulting, 2018

Forewarned Is Forearmed


It is in an organization’s best interest to help ensure that its employees are saving for a financially secure retirement. The case studies above are just two examples of the “hidden” savings pattern problems that may develop in an organization’s 401(k) plan. Financially stressed individuals are less likely to be saving sufficiently for retirement. Understanding the basis for this can help address the shortfall and shed light on other important workplace issues. Improving employee engagement can also go a long way to making employees more effective.

These problematic saving patterns and other such trends can be unearthed through a rigorous review of individual employee savings patterns. So armed, organizations can take steps to correct the problems sooner rather than later.

How We Can Help You

Sibson’s strategic deeper dive into DC plan data helps plan sponsors analyze changes in staffing based on growth, unexpected early retirements and aging workforce populations to inform plan design improvements and develop/improve employee communications. DC analytics also can assist in workforce planning — from rewarding critical roles and high-potential employees to considering investment decisions and deferral patterns and even integrating employee engagement — and can reveal useful insights that shape your HR recruitment and retention strategy. Sibson uses methodical diagnostics to create customized reports and solutions that are measurable and actionable.

Questions? Contact Us.

For more information about retirement readiness and/or to discuss how Sibson Consulting can help you help your employees prepare to retire, contact your Sibson consultant, the nearest Sibson office or one of the following professionals:


To receive Ideas and other Sibson publications, join our email list.

Sibson Consulting is a member of The Segal Group.



Analyzing participant-level data strategically can both uncover HR issues in your organization and identify DC plan successes and challenges. The following areas highlight different perspectives of your workforce to examine:

  • Retirement Readiness  Are your employees transitioning successfully into retirement as they approach the latter part of their careers to allow for successful workforce planning?
  • Employee Deferral Patterns  Are certain groups of employees decreasing their deferrals to the DC plan, and, if so, why?
  • Employee Engagement  Have you considered the correlation between employee engagement with the DC plan and overall employee engagement with your organization?
  • Rewarding Critical Roles  While your DC plan benefits all of your employees who participate, are your key employees utilizing the plan appropriately? Are you allocating your retirement contributions in line with your desired performance allocation?
  • Investment Decisions  Do the asset allocations of certain participants indicate that they may not be investing wisely?

Sibson creates customized reports based on your DC plan data to unearth compelling information regarding both HR issues and DC plan patterns. We then partner with you to develop an action plan that can subsequently be measured for success.

We home in on specific employee groups to see differences in plan behavior, which can help identify cohorts that may or may not be appropriately benefiting from the DC plan, as well as other notable group tendencies.

Learn more about Sibson’s Strategic DC Analytics services.


1 Warren Cormier, Allegra Heyligers and Larraine McKinnon,“The DC Plan’s Effect on Participant Engagement,” NAPA Net the Magazine, Fall 2013. (Return to the publication)

2 Getting participants from confident to prepared: The 2018 BlackRock DC Pulse Survey.” (Return to the publication)

3 Karie Willyerd, “What High Performers Want at Work,” Harvard Business Review, November 18, 2014. (Return to the publication)

4 Jan West, Engaged or Disengaged? That Is the Question, National Business Research Institute. (Return to the publication)

Share this page