Why Some Employees Don’t Enroll In Company-Sponsored Retirement Programs

Many workers are actively leaving money for retirement on the table by not enrolling in their company’s sponsored retirement program. 

According to a report released this week by retirement provider Vanguard, 18% of workers eligible for a retirement plan through their employer are not enrolled. Most employer-sponsored retirement plans (96%) have a matching program in which the company contributes a certain amount to retirement savings based on the employee’s contribution.

For companies that don’t provide an auto-enroll option, the responsibility falls on the employee to ensure they are picking a plan and contributions to reap the benefits of a company match. Of those who have to enroll manually, only 64% participate in their company’s retirement benefits.

Vanguard found a few reasons why many leave money on the table.

Some Felt They Lacked Information

A simple explanation that someone may have for not enrolling in an employer-sponsored retirement program is not feeling prepared to make a decision that can impact their future. 

Many may feel overwhelmed by the choices and have yet to make a long-term financial plan, the report found. As a result, they aren’t familiar with what type of plan or contribution amount makes sense for their goals. 

Or, they find it difficult to delay gratification, such as saving for retirement versus having money for things now, especially with ongoing concerns about inflation and market volatility. 

The Default Is To Not Choose Anything

Similarly, workers may feel paralyzed by the need to choose and decide not to choose any type of plan or contribution amount at all, Vanguard said. For companies that don’t offer auto-enroll options and instead require participants to take action to sign up, the default means having no plan.

Others Procrastinated

With retirement planning so critical, many feel the stress of picking what is “right” and defer their choice of a plan or contribution amount to another day, Vanguard found.

A large number of employees express an interest in saving more, according to Vanguard, but they often don’t get around to joining the plan. Or, if they do join, they don’t increase their contribution rate over time to grow as their salary grows.