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Why your 401(k) needs automatic escalation
Why adding automatic escalation to your organization’s 401(k) plan may help your employees increase their retirement savings, and prepare for their retirement.
When it comes to the retirement benefits your organization provides, you want what’s best for your employees and for the company. That’s why adding automatic escalation to your organization’s 401(k) plan is so great—it does both.
What is 401(k) automatic escalation?
Automatic escalation is a 401(k) plan feature that automatically increases an employee’s contribution amount. For instance, you can set the feature to increase employee contributions by 1% each year up to 15% or more.
If you already have automatic enrollment it just makes sense
Automatic enrollment and automatic escalation pair nicely together. It’s possible that employees who are already participating in the 401(k) plan have adapted their budgets and enjoy seeing their retirement balance increase. Make it simpler for them to save more by adding automatic escalation.
- 90% of participants stay in the plan once they're automatically enrolled.1
- 83% of employees say they're okay with automatic enrollment at a 6% deferral percentage.1
Employees need your help to save for retirement
We wanted to know how employees feel about saving for retirement. So we asked. And they told us they need (and want) your help to increase retirement savings.1 They also told us they feel good about the retirement plan doing some of the work for them through features like automatic enrollment and automatic escalation.1
- 42% of participants say automatic features helped them start saving for retirement earlier than if they had to enroll on their own.1
It’s through these features that you could provide the “nudge” your employees need to save more for their retirement.
For more information on automatic escalation, talk with your financial professional or third party administer if you work with one. Or give us a call. We want to help.
1 Principal Retirement Income Solutions Data, March 2019.
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