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Retirement has historically been a top savings priority of Americans, though recent data from the Survey of Consumer Finances Americans were prioritizing liquidity over saving for the first time in a decade. Americans saving for retirement frequently do so through workplace-based options, such as 401(k) plans. As ������Ƶ Fellow Michael Calabrese on retirement savings: “Participation in employer-sponsored plans peaked in the late 1970s and appears to be at its lowest level in more than 30 years.” Some demographic groups may be less likely to participate. As our , lower-income workers, for example, are both less likely to be offered plans by their employers and less likely to participate even when they have the option. Younger workers are also less likely to participate, in part because they may see retirement as a less pressing savings need than liquidity.

found that “in companies that do not automatically enroll eligible employees, just 13.4 percent of Millennials participate in the plan.” has found that auto-enrollment can significantly increase plan participation (though setting the right default contribution rates and implementing auto-escalation may be more important in determining overall savings accumulation). Consequently, auto-enrollment has the potential to reduce inequity in the retirement benefit sphere by narrowing the gap in participation between low and high-income employees, between white employees and employees of color.

We wanted to know what retirement plan participation was like in our office among Millennials, defined here as people currently age 30 and under. We took a casual (that is, not statistically significant) survey of 17 employees age 30 or under here at ������Ƶ and found that about 70% are contributing to ������Ƶ’s 403(b) plan (the non-profit version of 401(k) plans), despite the fact that we do not have auto-enrollment. (Huge caveat: according to the in 2011, just 25% of Americans ages 25-29 held a college degree. Meanwhile, 100% of our surveyed coworkers have a college degree.) While our non-random sample participates at a higher rate than the Wells Fargo study, several themes emerged from participants’ responses that reflect broader economic realities for the 30 and under set:

Tension Between Savings Goals
   
A number of our survey respondents expressed concern about the trade-off between saving for their retirement and meeting immediate needs. For example, some participants questioned whether they were yet making enough money to save for retirement, and explained that it seemed counterproductive to save for the future if that would necessitate depending on a high-interest credit card in the present. Others noted that it was more appealing to save in an account to which they would have immediate access in case they had to respond to an emergency. Nationally, younger employees tend to liquidate their retirement accounts than older employees, which may reflect similar concerns and circumstances.

Furthemore, some of our colleagues noted that they were conflicted about paying down their student loan balances versus putting money away for forty years from now. With average student loan debt for college graduates , balancing this obligation with long-term savings goals is undoubtedly an issue facing many young Americans. Again, however, this particular debt concern is unique to employees like our NAF colleagues who have had access to a college education. Additionally, those who enrolled in but didn’t finish college , further exacerbating these types of financial tensions.

Influence of Family and Friends

One theme that multiple NAF employees raised was the crucial role a trusted financial “advisor” played in their enrolling in the retirement plan. Many of our peers said they spoke with friends, parents, or even the financial advisors their parents had access to before or since enrolling in the plans. These findings are very consistent with the Survey of Consumer Finances which is a triennial Federal Reserve that measures asset holdings and attitudes toward personal finances. the most common source of information people rely on for borrowing or investing decisions is friends, family and “associates.”
   
The asset building field has can have on savings habits. The fact that many of our peers were encouraged (or admonished) by family members to open retirement accounts is yet another testament to the role families and social networks play in shaping savings goals and behaviors. Moreover, the high rates of educational attainment among NAF staff compared to the overall U.S. population likely influenced the responses we received. The role that access to higher education plays in: 1) leading to jobs that offer retirement benefits, 2) giving people access to information and social networks, and 3) creating an environment conducive to saving cannot be understated. Auto-enrollment is one strategy to create a more even playing field. Workplaces that enroll all employees in retirement savings plans by default, regardless of workers’ educational attainment or earning level, help bridge the gap. Furthermore, organizations such as have developed innovative strategies that complement auto-enrollment, such as one-on-one financial coaching, which democratizes access to information about personal finances.

Policy Implications

In its current formation, the 401(k) system of retirement savings is deeply flawed. Many workers are excluded outright because their employers don’t offer plans and many people who do have access feel too stretched to contribute meaningful amounts (or at all) to their accounts. As authored for the Next Social Contract Initiative, social insurance systems may be preferable to employer-based benefits and individual accounts for a few reasons: he writes that, “individual accounts are poor vehicles for retirement security because inequalities of income lead to inequalities of contributions, high management fees cancel out stock market returns, and financial scandals and market crashes can wipe out built-up assets for those unlucky enough to retire in the wrong year.” However, Attewell acknowledges that efforts to expand social insurance have seen staunch legislative opposition from those who favor privatized options.

In the meanwhile, a new piece of legislation from California aims for something of a compromise: universal employer-based retirement savings. As , creating a more universal employer-based retirement savings would go a long way to improving retirement security. The California Secure Choice Retirement program establishes a process to study, design, and implement the nation’s first state-administered, private retirement savings program. While the program is not without its critics, it represents a push forward for this vision of a more universal but still individualized system. in mid-January to learn more about this model for retirement savings.

Here in the Asset Building Program, we strive to promote and facilitate data-driven policy. Nevertheless, it’s important to recognize the connections between policy and personal experiences. This exercise provided an opportunity to view how a small subset of attitudes about retirement savings lines up with empirical trends.