Workers need 11 times their final pay to meet their financial needs in retirement, but the average U.S. worker has a savings shortfall of 2.2 times pay, according to a new survey.
Aon Hewitt, the global human resources solutions business of Aon plc, published this finding in a survey of more than 425 U.S. employers, representing 11 million employees, to determine their current and future retirement benefits strategies.
The survey reveals that to help bridge the retirement savings gap, most employers (80 percent) are making financial wellness a top priority in 2013. Six in 10 (61 percent) are helping workers evaluate their retirement readiness, up from 50 percent in 2012. Additionally, 86 percent of companies plan to focus communications initiatives on helping workers evaluate and understand how much they need to save for retirement.
To help workers reach their retirement goals, employers continue to offer and promote the use of investment advisory tools. More than three-quarters (76 percent) offer target-date funds. Of those who do not offer target-date funds, 35 percent will likely add this option in 2013, the survey shows.
Managed accounts and online third-party investment advisory services also continue to gain popularity (64 percent), up from just 40 percent in 2012.
The popularity of annuities, the survey adds, continues to rise. Currently, 28 percent of companies offer in-plan annuities, including professionally managed accounts with a drawdown feature, managed payout funds, or insurance or annuity products that are part of the fund line-up. This is nearly twice the percentage of employers (16 percent) that offered these solutions in 2012.
Of those employers that do not have these options, 30 percent said they are likely to add them in 2013.
Among the survey’s other key findings:
● 52 percent of companies will use podcasts and 42 percent will use text messages to communicate and educate their workers on their retirement benefits in 2013;
● The percentage of plan sponsors that plan to use social media channels to communicate with workers has tripled to 18 percent in 2013 from 6 percent in 2012;
● 37 percent of employers have recently reviewed the total DC plan costs (fund, recordkeeping, and trustee fees). Among those who have not, 95 percent are likely to do so in 2013;
● 35 percent of employers completed a review of DC fund operations, including fund expenses and revenue sharing; 87 percent plan to do so this year;
● 31 percent of employers recently changed their DC plan fund lineup to reduce costs. More than half (52 percent) of the remaining companies may do so in 2013.