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A Third of Americans Have Never Increased Retirement Contributions

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While nearly half of Americans save 10% or less of their annual income each year to their retirement accounts, many have never increased their contribution percentage.

While nearly half of Americans save 10% or less of their annual income each year to their retirement accounts, many have never increased their contribution percentage, according to a new study.

TIAA-CREF’s survey found 36% of Americans who contribute to their employer-sponsored retirement plan have never increased that percentage, even after their last raise (57%). Respondents commonly said the reason they did not increase their contribution along with a raise was because there was an immediate need to pay expenses. Just 25% said they did not increase their contributions after a raise because they were already contributing the maximum amount.

“Plan sponsors should have ongoing interactions with employees over the course of their careers around three critical actions: enroll in the plan, increase contributions every year and check asset allocations every year to rebalance if necessary,” Teresa Hassara, executive vice president of TIAA-CREF’s Institutional Business, said in a statement. “Auto-enrollment and auto-escalation options offer great benefit to overcoming employee inertia around retirement planning, but they are not universal, and they are not a substitute for employee engagement.”

Men were more likely than woman (33% to 17%) to contribute the maximum amount, while millennials were more likely than any other age group to increase savings after a raise. Half (52%) of millennials reported increasing contributions after a raise, and of those who did not, 23% said it was because they were already contributing the maximum amount.

Millennials were also significantly more likely to have changed how they invested their money in the past year with 59% making a change compared to just 42% of those older than 35 years. Furthermore, a third of those aged 55 and older said they have never changed the way their money is invested. According to TIAA-CREF, this means they are less likely to have taken the necessary steps to transition from saving for retirement to creating lasting income.

“Plan sponsors should be proactively looking for opportunities to engage directly with employees about their retirement savings, especially during pivotal times such as benefits enrollment season and after an employee receives a raise,” Hassara said. “Reaching employees at the right time with the right messaging can have a profound effect on retirement readiness.”

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