60% of Workers Think They’re Saving for Retirement—But Aren’t. Tracey Foley from Principal Financial Group Says More.
Every now and then you get to talk with someone whose work is revealing new things. In her 30 years at Principal and current focus on research, Tracey Foley has learned to ask good questions, and to examine the answers closely. We talk today about some interesting findings around automaticity, and how it may be influencing participation in both useful and not-useful ways. Hint: maybe more, and not less? Read on to see what we mean.
Tracey, it’s lovely to have you with us. You’re working on some cool stuff at Principal. Let’s start here. Your recent study found that as many as 60% of eligible nonparticipants thought they were participating in their employer’s plan. Tell us more.
Isn’t that a crazy statistic? It blew our minds. We usually survey active 401(k) participants, but this time we asked, “What about the folks who aren’t participating?” We knew who they were, so we sent them an electronic survey. One of the first questions asked was if they were participating in their employer-sponsored plan. If they answered “yes,” the survey ended—because we only wanted nonparticipants.
Even though our records showed a 0% deferral rate, a large percentage said they were participating. We double-checked the dataset—same result. So, we re-ran the survey, and again, among more than 2,000 respondents, almost 60% said they were participating when they weren’t. No contributions were going into their accounts.
Where did you go from there?
A couple of details made that 60% even more shocking. Sixty-four percent were Gen X—my generation—folks near retirement who believed they were contributing but weren’t. And about half of that 60% believed they had been auto-enrolled.
We started hypothesizing. Nearly half had held more than one job in five years. We know there is inconsistency in plan design from employer to employer. They may have been auto-enrolled at a previous job and assumed that’s how it always works. And most people don’t get paper pay stubs anymore. If you don’t know to log in and check deductions, you might have no idea what’s actually coming out of your paycheck.
So, participation—or nonparticipation—is a bit invisible. Automatically invisible, if you will.
That’s a good way to put it. We asked more about auto enrollment and found people are open to it. Many expect to be auto-enrolled.
Interesting—and an unintended consequence of an evolving retirement scene. People don’t automatically know where they stand.
Exactly. And when you start a new job, you’re enrolling in a lot of benefits at once—health, insurance, retirement. Some require annual re-enrollment; retirement often doesn’t. If you miss it, you miss it. There are re-enrollment campaigns out there, but it’s not as consistent as health insurance.
What did your research identify as key roadblocks?
Tracey: Three things stood out for us.
First—Eligibility is misunderstood. Many don’t know if they’re eligible.
Second—Confusion about status. People think they’re contributing when they aren’t—some thought they’d been auto-enrolled or believed they’d signed up.
Third—not surprisingly—is competing financial pressures. Forty-two percent cited debt as a main reason for not participating. By generation, Gen X was the most affected by credit-card debt, at 50%; Millennials had the most student-loan debt, at 39%; and medical debt showed up across all generations except Gen Z.
Depressing—but clarifying. Based on this research and your broader work, how are you thinking about access and participation?
A lot has been done to expand access—via private plans, state-facilitated programs, PEPs, and policy changes from SECURE 1.0 and 2.0 Acts. But it’s not just an access issue. It’s a participation and adequacy issue. Even with access, many aren’t joining—or they’re saving too little. With fewer defined benefit plans, retirement is more self-funded. Boomers are 65+, Gen X is up next, and we’re the first big 401(k) generation. My biggest concern: people not participating, or not saving enough when they do.
“It’s not just an access issue. It’s a participation and adequacy issue. ”
What best practices are you seeing that push back on that challenge?
This research gave us a renewed focus on automated features—what we call the “auto trifecta”:
Auto enrollment to get people in,
Auto increase to nudge saving higher, and
Auto re-enrollment to sweep in those not participating (including long-tenured folks missed by later plan changes).
SECURE 2.0 captures new plans and newly eligible employees—but not everyone who’s already on payroll. That will take time.
Right—it’s a great step. But plan sponsors should also review defaults today. Our best practice: default at 6% with a 1% auto-increase up to 10–15%. On caps, we support up to 15%.
That’s helpful for both private plans and auto-IRA programs. Many state caps are 8–10%; 15% aligns with long-term adequacy. Expanding on this—what about non-desk workers?
For these folks, automated features are huge. Non-desk workers—manufacturing, retail, healthcare—have physically demanding jobs and may not be able to work as long. For them, automated features matter even more so they can reach 15% contribution sooner.
Stepping back, there’s also a misconception that higher default contribution rates lead to higher opt-outs. We’re not finding that. Across large sponsors, our data show ~93% stay in the plan even at 7–10% defaults. At 1–3% defaults it’s ~96%. The difference isn’t huge, and the higher default creates meaningful savings.
Additionally, we can enhance the plan’s default effectiveness through strategic timing and clear messaging. Our participant marketing team has implemented personalized campaigns that align with key financial moments—such as salary increases, benefit enrollment periods, and account milestones. The messaging is intentionally direct and actionable. We clearly communicate contribution rates, specifically reference the plan name, and deliver information without unnecessary complexity.
Interestingly, straight-text, to-the-point emails often outperform graphic-heavy ones. Attention spans are short. People want to know what they can do, now.
We see this in auto-IRA outreach too—employers respond best when you tell them clearly what they must do and when.
Okay, let’s jump to the other end of the spectrum: retirement income. What are you seeing?
We’re seeing lots of innovation in defined contribution retirement-income solutions. We recently surveyed plan sponsors about their sense of responsibility on the decumulation end. We found that 93% of employers feel responsible to help employees prepare for the transition to retirement. 93%! And 83% of employers feel responsible for helping employees create income from their savings.
Employees want help, too. We take three key insights from this:
First—plan sponsors feel responsible and want to help.
Second—sponsors increasingly want to retain retiree assets—57% told us that—but only 23% say they have retiree-focused investment options. That’s a disconnect. Sponsors who said they want to retain assets gave us some of their top reasons. Sixty percent of them like providing vetted investments. A similar number value being a trusted source of education and/or advice. And nearly half referenced that larger plan assets help them keep fees low.
Our third insight is one your readers will understand: many traditional plan designs are missing the income components retirees need.
Not intended as an ad, but Principal makes available a wide set of solutions, both in-plan and out-of-plan, right?
Yes. We’re in a product-agnostic position. We make available out-of-plan retirement income products, like annuities, and in-plan options such as a hybrid solution that starts as a TDF and later transitions to a managed account. Soon we’re also launching a passive TDF series with an integrated guaranteed income component. Choice is good—but plan sponsors need help matching options to their workforce demographics.
Any read yet on take-up?
Many solutions are too new for firm take-up rates. Interest is real, and sponsors know “the time is now.” But when we asked about top priorities for the next 18 months, sponsors focused on the savings side—engagement, well-being, increasing contributions, and managing costs.
All good—but income wasn’t on the short list, even though they feel responsible. There’s a behavioral “comfort gap,” not a product gap. We need to nudge action—and that also means getting financial professionals and consultants comfortable, since they’re typically the gateway to the plan sponsor.
“This isn’t a product gap. It’s a comfort gap—for plan sponsors and intermediaries.”
Well said. With all that in mind, what do you see as near-term challenges and opportunities?
From a challenge perspective, the demographic pressures are only going to get stronger. Within just a few years all the baby boomers will be over 65, and Gen X is already turning 60. That reality raises the stakes on helping people transform savings into actual retirement income.
On top of that, adequacy remains a core issue. Too many people simply aren’t saving enough to reach replacement ratios needs for retirement.
We’re also looking at delayed retirements. Many workers won’t be able to stop working when they want, which creates ripple effects for workforce planning and employer budgets, and it’s especially hard on non-desk workers whose jobs are physically demanding.
Add to that the rising expectations of participants, who now want fast, personalized, digital experiences. We can’t treat everyone the same anymore.
On the opportunity side, there’s a lot to be excited about. Innovation is finally accelerating in services, solutions, and investments on the income side, and the needle is really starting to move after years of talk.
And then there’s technology. Tools like AI, and even large language models, open the door to new ways of moving faster, personalizing at scale, and meeting people right where they are.
Five years from now, people will be using AI constantly. The question is whether their provider is there with them—and how. Employees trust their employer as a source of vetted information. That’s powerful.
Completely agree. The employer is a trusted source—and that trust can carry through to decisions about retirement income.
Big picture in the retirement security space: it takes a village—employers, individuals, recordkeepers, intermediaries, and government policy. The pieces are coming together more now than in years past. It’s an exciting time to be in this industry and to make a real difference for millions of Americans.
Thank you so much, Tracey. We appreciate your discoveries and insights.
Tracey Foley is a Marketing Director in Retirement and Income Solutions at Principal®, where she leads the thought leadership team. She oversees proprietary retirement research and actionable insights that inform employers, financial professionals, and individuals on trends shaping retirement readiness and financial security.
Tracey is passionate about helping individuals grow and protect their assets and retire with confidence and dignity. She holds a B.A. in International Management and French from Central College and has earned the Chartered Life Underwriter (CLU®) and Retirement Income Certified Professional (RICP®) designations.
Connect with Tracey on LinkedIn, and by email here.
