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Does the Employer Match Matter?

A new study reveals that an employer-sponsored retirement plan match can more than double average annual plan participant savings — especially for moderate-income households.

According to the Hearts & Wallets study, “Retirement Income Programs & Employer-Sponsored Retirement Plan Engagement,” the past year saw average annual household savings increase almost a full percentage point to 5.5, up from 4.6% in 2013, based on Hearts & Wallets data.

However, average household savings allotted to employer-sponsored retirement plans dropped 7 percentage points in one year, slipping from 29% in 2013 to 22% in 2014. Eligible and participating households fell from 60% in 2013 to 56% in 2014.

The report says that the influence of a plan match is often underestimated since not all plans offer this incentive. The Hearts & Wallets analysis reveals the average national saver will be motivated to save $1,200.

Indeed, to the person for whom “getting the match” is very important, savings will more than double from $1,400 to $2,600, according to the report, which finds that the boost of a match is highest for middle-income savers, who increase their savings by 2.5 times with the motivation of a match.

Nationally, only 10% of savers eligible for a workplace retirement plan say their employer offers a 6%-plus match. A third say their match is 4% to 6%. Another third say the match is up to 3%. Almost a quarter (24%) say no match is offered.

While a growing number of plans have embraced automatic enrollment, those who rely on the incentive of the employer match should be attentive to the segmentation of those messages, according to the report. Of the 57 million households with access to a workplace retirement plan, half are Emerging (ages 21 to 27) and Early Career (ages 28 to 39) lifestage investors who do not respond to the same messages as older investors.

“Hearts & Wallets research shows younger Americans want freedom from dependence on employment for income but do not crave ‘retirement’ per se,” Laura Varas, Hearts & Wallets partner and co-founder, said. “Saving for a traditional retirement is only about half as effective as a motivation for young savers as it is for older ones. The targeting of marketing messages will engage the full spectrum of eligible savers and encourage eligible Emerging households to start building wealth as soon as possible.”

Key factors in inspiring higher household savings rates in employer-provided retirement plans include:


  • income;

  • industry;

  • sponsor match; and

  • effectiveness of messaging.


For additional coverage of the Hearts & Wallets study, click here.

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