Breaking Through the Saving Barriers

How an Employer-Sponsored Retirement Plan Can Help

Date: October 6, 2011

Contact: Paul Golden 303-224-3514, [email protected]

DENVER—Karen Watson regrets her decisions. Several years ago, the New Jersey woman withdrew $30,000 from her 401(k) plan—nearly a third of her savings—to pay off credit card debt, much of which she had accumulated by struggling to pay basic living expenses.

It wasn't the first time she dipped into her nest egg. Three years before that, she withdrew $40,000 from her 401(k) to pay off bills. Now at age 55, Watson worries about her retirement. And she isn't the only one.

Twenty-seven percent of American workers say they are not at all confident about having enough money for a comfortable retirement, according to the Employee Benefit Research Institute's 2011 Retirement Confidence Survey. The survey found that 56 percent of workers have less than $25,000 in savings and investments, and 29 percent have less than $1,000.

Wherever you are on the retirement savings spectrum, the National Endowment for Financial Education says it's never too late to get back on track with a plan.

Matching Funds Return

Many employers stopped offering matching funds during the recession, which prompted some employees to stop contributing, too. But in 2010, 66 percent of companies that sponsored a 401(k) plan offered a match—a 7 percent increase from the previous year, according to Deloitte's 2010 401(k) Benchmarking Survey. Additionally, 55 percent of companies that previously had suspended matching contributions plan to reinstate them within the next 24 months.

"Even if your employer doesn't match your 401(k) contributions, these plans are still a great place to save for your future," says Brent Neiser, CFP® and senior director with NEFE. "Every dollar invested in an employer plan will lower your taxable income for the year, and your savings will grow tax-deferred until you make a withdrawal later in life."

Balance Savings Goals

When money is tight, many families feel forced to make a choice between saving for retirement and supporting their children. A 2010 Sallie Mae study found American families with children who are likely to attend college rank saving for college as high a priority as putting away for retirement, with 20 percent of families naming saving for their kids' education their top saving priority.

"That can be a mistake, because there are many financial aid options available to cover tuition bills, but no one will offer you a loan to fund your retirement," says Neiser.

Even after children graduate from college, many are relying on financial support from their parents while they search for jobs in a tough economy. According to a May 2011 survey commissioned by NEFE and conducted online by Harris Interactive, 59 percent of parents are providing, or have in the recent past provided, financial support to their non-student adult children ages 18 to 39 who are no longer in school. As a result, 7 percent say they have delayed retirement and 26 percent have taken on debt.

"It can be difficult for parents to separate themselves from their emotions when their child is struggling, but they need to think logically for the sake of their own financial future and that of their child's," says Neiser. "If you don’t put something away for your future, you risk relying on your child for financial support in your later years."

Every Little Bit Helps

If you don't participate in your 401(k) plan, getting started is easier than you think. One of the biggest challenges is overcoming the "How can I start?" mindset.

Researchers at Dartmouth College took on that question with a NEFE-funded study designed to motivate and inspire new, low-income, female employees to capitalize on their employer benefit programs. These employees were identified as least likely to participate in Dartmouth’s retirement plan.

"[Our research subjects] know what they want to accomplish with savings. However, there is a gulf between what people aim for and their perceived ability to get there," says Dartmouth researcher Annamaria Lusardi.

The study participants learned, through videos and other examples, that saving even small amounts in a 401(k), whether or not you receive matching funds, will add up. For example, savings of just $25 per week in your 401(k) over 10 years will grow to nearly $20,000 (at an 8 percent rate of return). Over 20 years, your account would be close to $60,000. The program resulted in a 56 percent increase in retirement plan participation.

Getting Back on Track

If you stopped your 401(k) contributions—or if you have yet to begin—here are some ways to maximize your savings.

  • Take advantage: Sign up for your employer's retirement plan and make small, regular contributions. The funds will be taken directly from your paycheck before you have a chance to spend the money.

  • Increase your contribution: If you already save regularly, increase the amount you withhold from each paycheck. Aim for at least 10 percent of your salary.

  • Learn more: Learn more about strategies for those who have started saving late with NEFE's Guidebook to Help Late Savers Prepare for Retirement, found online at

  • Use what you have: If you're nearing retirement, learn how to pay yourself through retirement with the money you have. My Retirement Paycheck is a holistic retirement planning site that guides you through evaluating your assets and making them work for you. Visit

About Dartmouth Research

Increasing the Effectiveness of Retirement Savings Programs for Females and Low Income Employees: A Marketing Approach was conducted in 2008 by researchers at Dartmouth College. The study evaluated social marketing as a tool to encourage retirement plan enrollment in 124 employees at Dartmouth College. For more information on this research, visit

About My Retirement Paycheck

My Retirement Paycheck is retirement planning website that helps consumers pay themselves through retirement with the assets they have. Whether they've saved a lot or a little for retirement, the site guides them through eight interrelated retirement planning issues, helping them make decisions about their own retirement. For more information, visit

Survey Methodology

This survey was conducted online within the U.S. by Harris Interactive on behalf of NEFE from May 10-12, 2011, among 683 adults ages 18-39 who are not students, and 391 parents of children ages 18-39 who are not students. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology (including weighting variables) click here.




  • Paul Golden

    Media Relations Director

    Direct: 303-224-3514
    Cell: 303-918-3620
    [email protected]