Savings Inertia | Moving Beyond the Default

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New research has revealed some telling patterns in employee retirement plan contribution rates. According to PLANSPONSOR’s 2025 Participant Survey, nearly 4 in 10 participants said that – when choosing their rate – they simply stayed with the plan’s default setting.

What this means is that the default doesn’t always just start the retirement savings journey. For a significant portion of the workforce, it can end up defining it. The finding reinforces long-held notions around status quo bias and choice overload. That is, when a decision is complex or abstract, many people gravitate toward the path of least resistance. While auto enrollment and other plan design features have been successful in increasing participation, forward-thinking sponsors can consider doing even more.

Plan Design is Key

Plan sponsors have many design options available to them – beyond basic auto enrollment features – to further draw on the influence of behavioral economics. For example…
  • Raising the initial auto enrollment deferral rate: Increasing the rate can help employees get a faster start on their savings journey.  
  • Enhancing automatic escalation settings: Sponsors can increase individuals’ contribution rates over time by adding or, if applicable, raising, the annual auto escalation increment and/or increasing the escalation cap.
  • Stretching the match: Sponsors also can encourage higher employee contributions by stretching their match formula. For example, assume a sponsor currently matches 100% of participants’ contributions up to 3% of their salary. The sponsor could encourage people to double their own rate of savings – while holding the company’s match costs level – by instead matching 50% of contributions up to 6% of salary.

Hands-on Guidance Can Play a Crucial (and Welcome) Role Too

While plan design and automatic features can have a positive impact, there’s strong evidence that people also want additional, hands-on support as they make money decisions. Morgan Stanley at Work’s annual State of the Workplace Financial Benefits Study, for example, shows workers are looking for financial and retirement guidance. Of the options provided, respondents expressed the strongest preference for access to a financial advisor (47%) through their employer plan, with goals-based investment planning (45%) and retirement income solutions (43%) not far behind. 

From systematized plan design settings to hands-on guidance, sponsors and advisors may want to look for ways to help people move “beyond the default” and into paths that could set them on a better course for retirement readiness.

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