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Americans Aren’t Saving Enough Despite Good Intentions

Every year, LIMRA asks American consumers to list their top financial concerns. Having enough money for a comfortable retirement consistently ranks as the No. 1 concern. Yet, half of American workers are not contributing to a retirement plan or an individual retirement account. Among Generation Y (those aged 18-34), 56 percent are not saving for retirement.


We know people have good intentions and they want to do the right thing. But low financial literacy levels and the effects of longevity hurt even the best of their intentions to save.

Most Americans don’t know how much of their paycheck to save for retirement, so they rely on guesswork and cues from their employer. Matching formulas and default rates largely have determined how much people save, yet the question remains: What’s the right path to follow?  

The history of defined contribution plans so far has taught us what doesn’t work. For participants in a typical 401(k) or 403(b) plan, the current average savings rate is around 6 percent annually, which our research shows is inadequate. The problem is exacerbated by a lack of consensus around what savings approach to choose – a set amount based on replacing preretirement income, a percentage of each paycheck or some other method. These confusing and conflicting messages too often have resulted in workers making bad savings decisions or, even worse, slipping into inertia and not saving at all.  

We established the LIMRA LOMA Secure Retirement Institute to promote retirement readiness through research, education and innovation. We want people to be empowered with product and service solutions that encourage smart choices and enhance their ability for a secure retirement. We believe Americans would benefit from a consistent “rule of thumb” regarding a minimum rate at which income should be set aside for retirement. Why a “savings rate” rather than some other formula?  A savings rate is an easy message to communicate, understand and act upon.
That’s why we’ve teamed up with the Financial Services Roundtable, as well as several leading employers and industry associations, to support the “Save 10” campaign.  

There is a growing consensus that a minimum savings rate of 10 percent annually will be required of most Americans who anticipate working at least 40 years. Our research shows that currently, four out of five American workers are saving less than 10 percent of their income. At that rate, it’s not surprising that 62 percent of current pre-retirees (those aged 55-70 who are still working) have less than $100,000 in financial assets.  

Through this campaign, employers will be encouraged to enroll their workers in retirement savings programs automatically and gradually escalate the savings rate so that it equals or exceeds 10 percent. Making these adjustments early in a person’s career can make a huge difference in their standard of living in retirement.  

The “Save 10” campaign is an opportunity for the financial services community to deliver a clear and consistent message that is easily understood by workers and employers. So many decisions around retirement can be complex and confusing. The rate at which to save shouldn’t be one of them. “Save 10” is a simple and effective message to help remove the guesswork around retirement savings.

Advisors should look at “Save 10” as an important first step. Once they adopt it  as a financial habit, workers can increase their retirement assets more effectively, making an advisor’s role more essential. Currently, only 37 percent of pre-retirees work with an advisor. Among those who do, eight in 10 say they feel more prepared for retirement.

We’re not claiming that “Save 10” is a panacea for chronic under-saving. It is, however, an important effort to set Americans on a better path to a secure retirement.
You can learn more about this program at

Paul S. Henry is the managing director for retirement clients and products for the LIMRA LOMA Secure Retirement Institute. Paul may be contacted at [email protected] .

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