Empower examines public servants’ savings behavior and reveals compelling insights

  • State and local government employment remains well below pre-pandemic levels, and many government workers have opted to retire early.1

  • About half of government participants use professionally managed solutions.

  • On average, women in government save 15% less than men.

GREENWOOD VILLAGE, Colo., May 5, 2022–(BUSINESS WIRE)–The pandemic and economic uncertainty have created challenges for state and local government employees who say saving for retirement is a top financial priority for 2022.

Government employees saving in Empower’s workplace pension plans have steadily increased savings rates during the pandemic compared to two years ago and more government employees have contributed to these plans. An analysis of the savings behavior of 1.55 million active state and local defined contribution (DC) participants with Empower as the record keeper provides a comprehensive view of DC savings behavior and readiness to the retirement of state and local government employees. The analysis also shows the value of how a DC plan can bridge retirement income gaps.2

Most public sector workers are primarily covered by defined benefit (DB) plans, with DC plans acting as supplemental retirement plans for this segment. Fiscal challenges have forced many state and local governments to cut benefits and pension payouts, and many public sector workers are not covered by Social Security. These factors point to the importance of DC plans in closing retirement income gaps. However, research has found that public sector employees may need help maximizing their participation and commitment to the DC plan to improve their retirement readiness.3

“Government employees are the backbone of our communities and our country,” said Dan Morrison, senior vice president of government market. “It is essential that state and local government employees understand their expected future retirement income, as their retirement plans may not fully meet their retirement needs. This will help them start planning appropriately and fill in the gaps along the way. »

Empowering America’s Financial Journey™ analysis, explores how this segment of American workers is:

  • Stay resilient for the pandemic and uncertain economic conditions. They save an average of 6.4% of their salary in their workplace pension plan, compared to 5.9% two years ago.

  • Use professional management and when offered, four out of 10 government participants use a target date fund (TDF), whose usage levels steadily decline from generation to generation. Overall, 1 in 6 government participants use managed accounts. Compared to TDF users, participants using managed accounts have higher engagement, savings, and usage rates for advisory services provided by Empower’s Advisory Asset Group (AAG). 3

  • Improve results when planning their retirement. Engaged participants achieve nearly twice the savings of non-engaged participants (8.2% vs. 4.2%). Savings rates climb even higher to 9.9% for participants who engage with Empower’s AAG Registered Investment Advisor Representatives. 4

  • reach the age of 50, and this serves as a psychological trigger regarding retirement savings. Average savings rates increase for all participants, but are significantly more pronounced for engaged participants. Several factors may help explain this, including proximity to retirement, eligibility for catch-up contributions, or an increase in disposable income due to life stage.

  • Save less. Women participating in government save 15% less than men (6.0% vs. 6.9%). The difference in savings rates between genders is narrower in the corporate DC market (8% vs. 8.5%) and women outpace men’s savings rates at income levels above $60,000 in for-profit plans.

“Even with competing priorities, government employees have steadily increased their savings during the pandemic. They ranked saving for retirement as a top priority, and we find that engaged participants save significantly more than unengaged participants,” said Claudia Step, senior vice president. President and Chief Customer Experience Officer.

Empower is the second-largest pension fund accountant in the nation by total number of participants.5 Through this study, Empower aimed to better understand how participants behave and what motivates that behavior and, therefore, what insights and learnings can help working Americans on their journey to a secure retirement.

“We encourage all workers to get on the right track early; however, it’s never too late to start saving. This is especially important for the new Gen Z workforce who have time ahead of them. it and can benefit from higher engagement and savings rates,” said Luis Fleites, Director of Thought Leadership at Empower.

Click here to read the full study, Empowering America’s Financial Journey.™.

About Empower

Headquartered in the Denver metro area, Empower administers approximately $1.4 trillion in assets for more than 17 million retirement plan participants and is the second-largest retirement plan accountant in the nation by total number of attendees.5 Empower serves all segments of the employer-sponsored retirement plan market: 457 government plans; small, medium and large business 401(k) customers; 403(b) non-profit entities; private label registrar clients; and IRA customers. Personal Capital, a subsidiary of Empower, is an industry-leading hybrid wealth manager. For more information, please visit empower.com and join us on Facebook, TwitterLinkedIn and Instagram.

1 Bureau of Labor Statistics, Current Employment Statistics Highlights, February 2022.

2 Empower analyzed 1.55 million active participants in state and local government defined contribution plans. The analysis is an aggregated view of public DC plans, including various plan types – such as 403(b), 457, 401(a), and 401(k) – that are available to different segments of public employees.

3 Online advice and managed account service are part of the Empower Retirement Advisory Services suite offered by Advised Assets Group, LLC, a registered investment adviser.

4 Engagement is defined as at least one interaction in a calendar year through the participant’s website, mobile apps, call center or Empower Retirement Solutions group and retirement plan advisors, served by representatives of registered investment advisers.

5 Pension & Investments 2020 Defined Contribution Survey Ranking as of April 2021.

6 As of April 1, 2022. Information refers to all retirement businesses of Great-West Life & Annuity Insurance Company (GWLA) and its subsidiaries, including Empower Retirement, LLC; Great-West Life & Annuity Insurance Company of New York (GWLANY); and Prudential Retirement Insurance & Annuity Company (PRIAC), marketed under the Empower brand. Assets represent the estimated consolidated pro forma assets under administration (AAU) of Empower and the full-service pension business of Prudential Financial, Inc., as of December 31, 2021. AAU is a non-GAAP measure and does not reflect the financial stability or strength of a company. As of December 31, 2021, GWLA statutory assets totaled $75.9 billion and liabilities totaled $73.0 billion, GWLANY statutory assets totaled $4.1 billion and liabilities totaled $3.9 billion , and PRIAC’s statutory assets totaled $100.329 billion and liabilities totaled $98.793 billion.

Securities, when offered, are offered and/or distributed by GWFS Equities, Inc., Member FINRA/SIPC. GWFS is a subsidiary of Empower Retirement, LLC; Great-West Funds, Inc.; and Registered Investment Advisor, Advised Assets Group, LLC. This material is provided for informational purposes only and is not intended to provide investment, legal or tax advice or recommendations.

Empower Retirement refers to the products and services offered by GWLA and its affiliates, including Empower Retirement, LLC. Empower Retirement is not affiliated with Prudential or its affiliates. All product names, logos and brands are the property of their respective owners. “EMPOWER”, “EMPOWER RETIREMENT” and all related product names and logos are trademarks of GWLA. Prudential and all related logos are trademarks owned by The Prudential Insurance Company of America and are used under license.

See the source version on businesswire.com: https://www.businesswire.com/news/home/20220505005198/en/


Stephen Gawlik – 617-417-4408 – [email protected]
Monica Mendoza – 719-373-2460 – [email protected]

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