2023 Retirement Trends Report

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A New Saving Paradigm in 2023

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.

Section I

Vestwell’s Internal Saver Data

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.

Average Annual Contribution Between 2021 and 2022 by Age Group

  • Gen Z (10 – 25)
    • $4k
    • $4k
  • Millennials (26 – 41)
    • $8k
    • $9k
  • Gen X (42 – 57)
    • $11k
    • $12k
  • Boomer (58 – 67)
    • $13k
    • $12k

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.

Section II

Vestwell Annual Survey Results

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.

Trend No.1

Employees Increasingly Recognize the Value of Working with a Financial Advisor

In times of uncertainty, people turn to experts for guidance. 90% of savers indicated they think it’s important to work with a financial advisor, with over 48% of savers saying that inflation and a volatile stock market have made working with an advisor more important.

When asked what areas savers felt they could most benefit from the help of an advisor, retirement planning was the number one choice, with almost 24% of respondents selecting it. This was followed by investment strategy (20%), and expense planning (14%). Above all else, savers indicated that working with an advisor would help them achieve an overall peace of mind.

Once more, this finding reflects a growing taste for saving among employees. There is high interest in the type of sophisticated financial advice one can only receive from a certified professional. Employers who are able to connect their benefits package with the services of an advisor may be able to differentiate themselves from competing firms in the labor market.

“The rise in inflation in the last year has made it more valuable to work with a financial advisor.”

Neither Agree nor Disagree
Strongly Agree
Strongly Disagree
Trend No.2

Employees Expect Retirement Benefits in the Workplace

Employees increasingly expect a retirement benefit to be offered by their place of work, even if they choose not to participate. Of the nearly 1,300 employees included in Vestwell’s annual survey, over 72% of them said they “expect employers to offer a 401(k)/403(b)” in light of the tight labor market. In fact, this statistic may even understate the popularity of company-sponsored retirement plans. While almost three quarters of survey respondents expect a retirement plan to be offered, 98% of respondents said they think it’s important for their employer to provide a retirement benefit.

The popularity of employer-sponsored retirement plans is also evident in individuals’ self-reported saving priorities. When asked to rank the importance of their various savings accounts, a majority of all respondents selected their 401(k) as the most important. This was followed by savers’ IRA and cash balance accounts as the second most important, with emergency savings, health savings, and 529 accounts rounding out the rankings.

Rank the following savings accounts in order of importance relative to your current financial situation:

% ranked first overall
  1. 401(k)
  2. Cash Balance
  3. IRA
  4. ESA
  5. HSA
  6. 529s

Our survey found a similar result regarding employees’ saving goals: preparing for retirement is a key priority, with over 47% of respondents listing it as their number one saving goal. Following this was paying off debt, which 34% of respondents listed as their number one goal, and saving for healthcare expenses, which 9% of respondents listed as their number one goal.

All told, a super-majority of our responding population indicated that they see retirement benefits as an expectation, rather than an exceptional perk. Employers seeking to differentiate their benefits package may consider offering additional savings benefits beyond just a retirement plan. This effect may be bolstered by recent legislation such as SECURE 2.0, which significantly sweetens the deal for small businesses interested in offering their first retirement plan.

"Due to the Great Resignation (i.e. competitive labor market), I expect employers to offer a 401(k)/403(b)."

Strongly Agree
Neither Agree nor Disagree
Strongly Disagree
Trend No.3

Employees are Increasingly Looking for Retirement Education from Employers

The vast majority of employees surveyed believe companies that offer a retirement plan should also provide education about it. Just under 90% of workers indicated that their employer should be involved in retirement education. Importantly, 59% agreed or strongly agreed that companies should have responded to the Great Resignation with a more hands-on approach to providing retirement information.

To meet this demand, employers are increasingly looking for advisor support: 30% of employers who work with advisors said they wish advisors did more for employee education, making it the service employers would most appreciate expanding. This was followed by “personalized investment recommendation for employees” (27%) and “tax planning and assistance” (26%). This insight, combined with the employee expectation for retirement education, suggests an opportunity for advisors to expand the financial wellness services they provide to clients and help employers better serve their teams.

Regardless, these results are further evidence that retirement education—and a retirement plan to go along with it—is seen as an expectation among today’s employees. Offering a retirement benefit and complementary education may help employers stand out from the competition and retain their top talent in 2023.

If you work with a financial advisor, is there anything you wish that they would do more of?

  1. Employee Financial Literacy
  2. Employee Investment Recommendations
  3. Tax Planning and Assistance
  4. Long Term Financial Planning
  5. Short Term Financial Planning
  6. Plan Design Recommendations
  7. Industry Trend Education
Trend No.4

Employees and Employers are Interested in Expanding Benefits

Beyond simply offering a retirement plan, workers also expect certain benefits within that plan, in addition to other forms of company-based savings programs. Employees responded with overwhelming enthusiasm to the notion of an increased employer match, as 89% of employees surveyed said an increased match is a key benefit for them, making it the most popular new benefit overall. Furthermore, employees who aren’t yet contributing to their retirement plan listed it as one of the most important motivators for them to get started, right behind a higher salary. 28% of savers reported that an increased match would encourage them to begin contributions.

If you are eligible to contribute to your workplace retirement plan, but you have not contributed as of August 2022, what would most motivate you to contribute?

  • A Higher Salary
  • A Higher Match
  • Nothing
  • Better Financial Education
  • Paid Off Personal Debt
  • Other

However, other forms of employer-based saving programs were also popular choices. The vast majority of participants were interested in adding a guaranteed lifetime income stream such as a deferred annuity. At the same time, only 40.42% of employers say they would want to make a lifetime income savings solution available to themselves and their employees. This suggests there is a potential opportunity for companies interested in exploring this option to highlight this as a differentiator in recruiting talent.

Similarly, there is also interest among workers in a Health Savings Account (HSA). Respondents listed “health savings” as the third most common saving goal, behind only retirement and paying off debt. Notably, there is significant convergence between employer and employee interests here: Just under a third of employers said they were interested in expanding benefits, and of those respondents, 66% indicated they were most interested in adding an HSA program.

At a high level, these results reflect an expanded “taste for saving” among our responding population. Beyond having a clear interest in saving for retirement, a majority of respondents are also interested in alternate life-long income streams and tax-advantaged saving accounts for healthcare. Perhaps in response to the pressures of high inflation, or to retirement benefits becoming an expectation for many, employees are looking beyond their retirement account for new savings opportunities.

How do you feel about adding a guaranteed lifetime income stream such as a deferred annuity?

  • Strongly Consider
  • Consider
  • Unsure but Interested
  • Not Interested
Trend No.5

Employee Financial Stress has Increased with Market Volatility & Inflation

Inflation and volatile markets have had a notable impact on employee wellbeing.

76% of savers reported some level of stress regarding their financial situation. A further 66% of respondents agreed that inflation and market volatility had increased their previous levels of financial stress, and 48% believe they should be saving more in the current economic climate. Further evidence of this phenomenon can be found in the disparity between savers’ stated goals and their actual contributions: The mean survey respondent wishes they were contributing 3% more to their retirement account than they currently are.

In many ways, this trend lies at the intersection of our report’s key themes: a majority of employees surveyed are experiencing financial stress and believe they should be saving more, while employers are in a unique position to provide them with additional outlets for doing so. Combined with employees’ strong interest in additional forms of saving benefits, such as a guaranteed income stream or HSA, employers are in a unique position to meet the demand for enhanced benefits to help alleviate employee stress.

“I should be contributing more to my 401(k)/403(b) due to inflation in the last year.”

Strongly Agree
Neither Agree nor Disagree
Strongly Disagree

Looking Ahead

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.