Helping Employees Bridge the Retirement Savings Gap

Understanding the gap—and why it matters

The retirement savings gap reflects the difference between what employees have saved and what they’ll need to generate a sustainable income in retirement. It’s an issue that increasingly requires employer attention, as it can lead to delayed retirements, greater financial stress and downstream impacts on workforce planning, productivity and benefit costs.

The factors driving the gap:

• Delayed or missed participation in retirement plans, reducing the power of compounding over time.
• Contribution rates that are too low to support long-term income needs.
• Investment missteps, such as poor allocations or lack of diversification.
• Asset leakage from loans and withdrawals, steadily eroding balances over time.

Improving outcomes and retirement readiness requires a dual focus on strengthening plan structure and helping employees make better financial decisions.

Priority actions for plan sponsors

For plan sponsors looking to make a meaningful impact, several high-leverage strategies consistently move the needle, so focus here first.

• Implement auto-enrollment and auto-escalation to boost participation and savings early.
• Set higher default contribution rates to create stronger starting points.
• Re-evaluate employer match design to encourage higher deferrals.
• Use strong default investments, like target-date funds, to support disengaged participants.
• Take steps to reduce loan and withdrawal leakage to preserve long-term growth.
• Expand financial wellness and education to address underlying financial stressors.
• Personalize engagement to drive more relevant, timely participant actions.

Strengthening the foundation: Plan design that works harder

Effective plan design reduces the burden on employees to “get it right” on their own.

Use automation to simplify decisions.

• Auto-enrollment helps employees start saving sooner.
• Auto-escalation encourages gradual, manageable increases.
• Higher defaults create a stronger baseline for long-term success.

Align incentives with desired behaviors.

• Stretch matches: retirement plan contribution formulas that reward employees for saving more by matching beyond traditional thresholds.
• Immediate vesting reinforces the value of employer contributions.

Improve outcomes through strong investment defaults.

• Target-date funds provide diversified, age-appropriate portfolios.
• Ongoing oversight helps ensure investments remain aligned with workforce needs.
• Working with an advisor to evaluate QDIA (qualified default investment alternative) quality and suitability supports fiduciary decision-making.

Promote more inclusive plan design.

• Expanded eligibility can broaden access to retirement benefits.
• Thoughtful contribution formulas may help support lower-income or underserved employees.

Reducing leakage to preserve long-term growth

Even small “leaks” can significantly disrupt long-term growth by interrupting compounding.

Plan design considerations.

• Limit the number of allowable loans to reduce overuse.
• Use shorter repayment periods to minimize disruption.
• Restrict loan refinancing to prevent repeated borrowing cycles.

Improve participant awareness.

• Deliver clear education on the long-term impact of withdrawals.
• Reinforce tax consequences so trade-offs are fully understood.

Preventive strategies.

• Encourage emergency savings to reduce reliance on retirement funds.
• Provide budgeting tools to support financial stability and better decisions.

Elevating financial wellness through personalized engagement

Financial stress remains one of the biggest barriers to consistent saving. Addressing it can unlock better retirement outcomes.

Expand financial wellness support.

• Offer budgeting and debt tools to improve cash flow.
• Provide student loan support to ease competing priorities.
• Include financial coaching to build confidence and decision-making skills.

Make engagement more relevant.

• Deliver personalized, timely communications.
• Align outreach with life events when employees are most likely to act.

Encourage action through behavioral nudges.

• Small, well-timed prompts can drive lasting change.
• A multichannel approach increases visibility and engagement.

“Closing the retirement savings gap isn’t solved by a single plan sponsor action,” notes St. John, “but rather it’s about consistently aligning plan design, participant engagement and financial wellness support.”

He shares, “When employees feel more financially stable and confident, they’re far more likely to stay engaged and make decisions that support long-term retirement success.”

The takeaway: A smarter, more intentional approach

Bridging the retirement savings gap requires a coordinated, practical approach. Plan sponsors who focus on high-impact design decisions, behavioral strategies and personalized engagement can meaningfully improve employee outcomes.

Supporting employee financial security isn’t just a benefit—it’s an investment in workforce stability, productivity and long-term organizational success.

Partner with Associated Bank

Associated Bank works alongside employers and retirement committees to design, manage and evolve retirement plans that support better outcomes—for employees and organizations alike.

Not sure where to begin? Get in touch with our Retirement Plan Solutions team and learn how we can help strengthen your retirement plan strategy.