401(k) auto-enrollment features don’t help savings as much as expected, study finds

Published On Aug 28, 2024, 3:15 PM

A recent study shows that 401(k) auto-enrollment and auto-escalation strategies, designed to increase retirement savings, are not as effective as once believed. Although these strategies have promoted savings, factors like job turnover and early cash-outs significantly reduce their benefits. The effectiveness of auto-enrollment raised average contribution rates by only 0.6 percentage points, which is a significant drop from earlier estimates of a 2.2 percentage point increase. This decline is partly due to about 40% of workers cashing out their 401(k) when changing jobs, leading to substantial financial differences over a career.