Confident and knowledgeable group retirement savings plan members are saving 86 per cent more than those with low confidence and literacy, according to a new survey by Sun Life Financial Inc.
The survey, which polled more than 1,900 plan members, found nearly a third (30 per cent) believe they have both confidence and strong financial literacy. Highly confident savers put away 64 per cent more of their income than their less confident peers, while individuals with higher literacy saved only 12 per cent more than those with lower literacy.
Several factors can impact a person’s retirement and investment confidence, including financial literacy, personal circumstances and goals, risk tolerance, market conditions and personal philosophies, says Dave Jones, senior vice-president of group retirement services at Sun Life, noting employers have an opportunity to help employees build confidence.
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“It can be as simple as reinforcing support that is already available, offering timely nudges or simplifying plan design. For example, employers can set up smart defaults to help get employees into the plan right away. That way, employees can capture every dollar available from their employer plan and accumulate savings faster.”
Workplace plans are critical, the survey said, noting more than half (52 per cent) of plan members said they expect their group retirement plan to be their main source of retirement income. Nine in 10 (90 per cent) of members said they contribute enough to capture their full employer match, while 80 per cent expressed interest in automatic features such as auto-enrolment (63 per cent) and auto-escalation (66 per cent). More than two-thirds (70 per cent) said they want access to financial advisors for holistic retirement planning through their workplace plans.
On average, plan members over-estimate savings by $23,000 or 14 per cent. The survey found respondents believed they held $159,000 in their workplace plan, but actual balances averaged $136,000, highlighting a significant disconnect between perceived and real retirement readiness that could derail financial planning.
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It also found the gender savings gap persists. Men are more likely to be high-confidence investors, while women tend to be more cautious. The survey noted women contribute 21 per cent less than men to group retirement plans, despite generally needing to fund longer retirements with less savings and facing more health challenges.
In light of these challenges, Jones says employers can make a meaningful difference by tailoring unique programs to reflect the reality of women’s financial journeys.
“It’s important to create space for confidence-building, not just knowledge-building. . . . Programs focusing on hands-on guidance, decision tools and relatable scenarios help build confidence, so women feel better equipped to take action.
“Offering learning that seamlessly fits into their life and focusing on areas such as planning for career breaks, managing longevity risk, rebuilding savings after time away makes learning more accessible and sustainable.”
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