Retirement regrets: Majority of Americans wish they’d started saving sooner

The majority of Americans wish they’d started saving for retirement sooner, while 60% regret withdrawing money early from their 401(k), according to a new Human Interest survey, Retirement Roadblocks Survey 2024. However, the survey also highlights what employers can do to help bridge the retirement gap.

Human Interest, a 401(k) provider with over 25,000 customers, reveals that 83% of American workers surveyed have regrets about their retirement planning decisions, even though financial pressures are pushing employees to focus on short-term financial concerns rather than long-term retirement savings.

The survey, which interviewed 1,041 full-time employees, also found that 41% of Americans expect to retire later than planned due to recent financial circumstances and 83% plan to continue working after retirement.

When asked what they would change and what they regret about their retirement saving choices, 68% of respondents said they would have started saving for retirement sooner. Surprisingly, 19% didn’t start saving until they were 41 or over, and 83% of those wish they had started earlier.

“When a company offers a retirement benefit, one key element is to make sure the employees are aware and understand the offering,” said Marc Fowler, Director of Education at Human Interest. “Most providers will run enrollment meetings for participants and have employer-specific education portals that help explain the benefits of the plan for the employees.

“If a company’s 401(k) provider offers financial consultation, make sure employees know that this service is available and how to access it. That way, they can have their questions answered with information specific to their plan. If that is not available through a 401(k) provider, employers could connect with local financial advisors about consultation services for their employees.

“Additionally, employers could host workshops or eLearning calls with experts from the 401(k) provider, a local financial advisor, or a community center to help employees understand retirement benefits and money management techniques.”

When employees were asked about their biggest retirement regret, the most common answers in the survey were:

• investing too late (26%)
• investing too small a percentage or amount of money (14%)
• not having enough knowledge to make informed decisions (13%)

In addition, 37% of respondents reported having removed money from their accounts. 17% of respondents have taken a loan against their 401(k) and 23% said they had withdrawn money early before retirement.

Only 2% of respondents could answer correctly what age someone must be to begin withdrawing from a 401(k) without a penalty, according to the survey. According to the IRS, individuals can start taking withdrawals from the IRS at age 59 ½ without incurring an early financial penalty.

While almost half (48%) of respondents have taken a 401(k) loan, 60% who withdrew the money report regretting their choice.

“Obviously, when someone is investigating a loan or withdrawal for any reason, it can be a stressful time and provides a good opportunity to work with their organization’s benefits team,” said Fowler. “This is one of the times when education and guidance can prove invaluable. The benefits team can point them in the direction of relevant education around the full range of options available, help them uncover sources of consultation for individualized guidance, present other benefits the employee was not aware of and even be a source of support themselves.

Employer guidance

According to Human Interest, employers have a strong influence over whether, when, and how much an employee saves by offering a robust 401(k) including:

• easy onboarding: 14% abandoned the enrollment process due to complexity
• auto-enrollment: increases participation rates
• auto-escalation: 1% annually is recommended
• employer matching: 22% of employees say employers do not match

“Contribution matches are a powerful incentive for attracting and retaining talent,” said Fowler. “When reviewing a new job opportunity, prospective employees often consider that as part of their compensation package … The most requested change to full-time workers’ employer-sponsored plans is a higher matching contribution from their employers.

Related: New playbook helps employers roll out a successful financial wellness program

“Additionally, with the rise of state-sponsored auto-IRA plans and associated requirements, it will become harder for employers to stand out by merely offering a “retirement benefit.” Instead, potential employees should consider the added benefits that a 401(k) may provide and plan design features like an employee match that employees may seek.”

Auto-escalation benefits employees by automatically increasing an employee’s deferral rates at predetermined intervals until the plan’s maximum contribution rate is hit, according to Human Interest. This feature may encourage less financially proactive employees to save more for retirement, suggests the survey. An auto-escalation rate increase of at least 1% annually is recommended.

Additional findings from the survey detail the many retirement challenges that the average employee faces and the role employers can play in supporting employees to bridge the retirement gap.

According to the survey, when employers offer education around general financial wellness, 91% of employees enroll in their employer-sponsored plan. When no education or any kind of financial resources are offered, only 76% of employees are enrolled.

Alarmingly, around 31% of employees do not know how much they have saved for retirement – and 10% do not know the steps to take to find out.

“These survey results validate the innovations that we continue to drive,” said Fowler. “We’re bridging the retirement gap by providing customized retirement plans for every kind of worker, easy-to-use tools so employees are empowered to take control over their retirement planning, and access to the financial education workers need to make smart retirement decisions.”