As the leading small business retirement and individual savings platform, we conducted our annual survey to uncover trends in the savings industry that can help businesses and their employees achieve the retirement experience they deserve. Our report uncovers the trends that are leading to a new paradigm in 2023: where employers are expanding their benefits, offering a retirement plan is an expectation, and employees are increasingly looking for retirement education as part of a company-sponsored retirement benefit.

In the first section of this report, we examine Vestwell’s proprietary saver data. In doing so, we recount the saving behaviors that are being displayed by account holders across generations and gender, as well as explore the impact of the recent economic climate on general saving tendencies

In the second section, we explore insights surrounding retirement and savings beliefs from our Annual Survey. Encompassing thousands of savers, small businesses, and financial advisors, our analysis reveals emergent trends, surprising correlations, and intelligence you need to understand retirement heading into 2023. With this information, we uncover a few key takeaways that employers should consider in the new year, such as:

• Retirement benefits are an expectation for employees, and there is high demand for resources from their employers.
• Employees are experiencing high financial stress, and many wish they were contributing more to their retirement account than they are currently.
• Employees’ “taste for saving” is expanding, with interest in additional savings opportunities and the help of a professional advisor.

Taken all together, we paint a picture of a new era in employer-sponsored savings, where a large contingent of employees are responding to the combined economic forces of high inflation and a strong labor market. At the same time, recently-passed legislation like the SECURE Act 2.0 has enabled a monumental shift in the industry, expanding retirement access to small businesses and savers that are historically difficult to reach. With this dynamic at work, employees increasingly feel the need to save and have an expectation that their employer will be able to help them do so, potentially extending beyond the realm of retirement.

In the past year, major indices like the Nasdaq Composite declined by over 30%. Inflation hit generational highs, with 8.2% growth in consumer prices from September 2021 to September 2022. On the other hand, unemployment fell to 3.5%—tied with February 2020 for its lowest level since 1969. These conditions, paired with large corporate layoffs in the midst of a historically strong labor market, indicate a highly uncertain economic future.

Despite these tumultuous market conditions, our proprietary data, consisting of savers across the country, demonstrates that setting aside funds for retirement remains a top priority.

Saving Behavior Ahead of 2023

Examining the average deferral rate across all Vestwell savers, we find a steady pace of saving throughout the year. In 2021, the average deferral rate was 6.98%, while the average deferral rate of Jan. 2022 through Oct. 2022 sat at 6.79%. This represents a change of 0.19% between the beginning of our sample period and its conclusion.

A similar trend can be seen when looking at the actual amount employees contribute each month. In 2021, the average monthly contribution by employee savers in workplace retirement plans supported by our platform was $870, while the average monthly contribution from the beginning of 2022 through Oct. 2022 was $770. However, we can expect these numbers to converge once 2022 catch-up contributions are accounted for, which was not included in the time series of this report.

Similarly, by breaking down saving data into age cohorts, we see the average annual contribution for every generation held firm. Every cohort saw their average annual contributions stay within $1,000 of their 2021 levels, despite the drop in general market performance over the same time period.

Our data on saving behavior by gender showed clear continuity in saving behavior from the beginning of the year to the end. From Oct. 2021 through Sept. 2022, the average contribution rate for women remained unchanged at 7.5%. Men’s saving behavior was similar, from Oct. 2021 through Sept. 2022, the average contribution rate remained 6.8%. Overall, our data noted minimal differences between the savings behaviors of men and women on our platform.

Additionally, we examined trends in withdrawals taken over the course of 2022. Based on Vestwell's analysis, the number of withdrawal requests peaked in October and November 2022, with the lowest number of withdrawal requests in January and February. Outside of plan and participant terminations, the most common withdrawal reasons were listed as hardship (21%), retirement age (4%), and children (4%).

Vestwell's 2021 data showed a similar pattern, with withdrawals peaking in October and November of the year. Similarly, beyond plan and participant terminations, the most common withdrawal reasons were hardship (17%), retirement age (4%), and children (3%). However, as noted in Section 1 of this report, this change in withdrawals did not translate into a significant reduction in the average contribution rate of savers in workplace retirement programs on the Vestwell platform.

While our proprietary data can establish trends relating to saving behavior, our annual survey can give us insight into why people save the way they do. This year, we asked nearly 1,300 savers about their saving behaviors, long-term goals, and the value of different saving-related benefits.

In analyzing the results of our survey, we were able to identify five major trends that employers can act on today. From expectations of retirement benefits, to the desire for additional savings accounts, our findings reflect an economy where workers are interested in saving more than ever. Together, our trends show an unmet demand for saving opportunities that employers are poised to fill.

Our survey data reveals a win-win opportunity for employers—especially small businesses. At a time when workers believe they should be saving more, small businesses have the ability to meet this demand with a company-sponsored retirement plan. They also have the ability to provide additional tax-advantaged savings vehicles for the employees demanding them, which may help them compete for talent in a hot labor market. All this while legislation like the SECURE Act 2.0 has reinvented the retirement landscape, significantly increasing the tax credits for starting a new plan and mandating features like auto-enrollment that increase the reach of each plan.

As we enter the new year, our survey shows an opportunity for small businesses, technology providers, and advisors to come together and embrace the new savings paradigm of 2023: where retirement plans are an expectation, employers are expanding their benefits, and employees have confidence in their position in the market.