To save or not to save... that seems to be the question these days. Retirement and personal finance "life hacks" are everywhere, but which of them actually work? And what happens when folks just don't have the education and resources they need to save smart? Let's dive into these questions and more! 🕵️👇

📚 This Week in Retirement

1. ​Households with less than $48,000 in annual income that have a written plan are more likely to save > 10% of their income when compared with those who don't write their financial plans down.
2. A new TIAA study finds no connection between high school financial literacy education and improved savings outcomes later in life.
3. ​Tesla commits to a 6% 401(k) match after three years of not matching any employee contributions.

💡 Spotlight on... 403(b) Enrollment

The COVID-19 pandemic has cast a spotlight on "essential workers," including America's teachers. Now more than ever, we're recognizing and appreciating the massive role teachers play in keeping our society running. Just one example: a 2020 survey found that 80% of parents have more respect for teachers than they did before the pandemic.
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Yet when it comes to retirement savings, some public school employees are being left behind. North Carolina's state treasurer recently announce the discontinuation of NC's 403(b) plan in favor of models with higher participation rates. 403(b) participation has been an issue nationwide since at least 2015. What is it about the 403(b) model that have made participation rates so dismal? And what can be done to turn them around?

By far, the biggest obstacle facing 403(b) plan sponsors is a lack of auto-enrollment support. Private-sector 401(k)s are largely opt-out accounts (thanks to innovators like Richard Thaler), effectively TRIPLING employee participation. But HALF of US states either restrict auto-enrollment until it's collectively bargained for, or have banned it altogether. Participants are much more likely to use and grow their retirement savings in an account when part of their paycheck is allocated there by default.

Another issue is employer match — in 2015, the LIMRA Secure Retirement Institute reported that 72% of 403(b)s did not offer an employer match, meaning that public school employees who enrolled would lose out on a major benefit of their employer-sponsored plan. And if their state offered them another type of plan — like a 457 — that matched, that plan would have an obvious upper hand.

Lastly, many public sector workers may still buy into the notion that their state pension plan and Social Security will fully cover their retirement expenses, so there's no need to save in an additional account. However, this is not usually the case. Social Security reform and scaled-back state pensions have necessitated supplemental savings vehicles. According to the North Carolina State Treasurer’s Office website, 77% of employees who are enrolled in just one supplemental plan is considered on track for 80% income replacement during retirement. By comparison, only 44% of unenrolled people are considered on track.

So how can states make 403(b) plans more effective at enrolling and retaining participants? Here are some ideas:

1️⃣ Advocate for auto-enrollment for state-sponsored plans

This can be done either through collective bargaining agreements or through direct legislation. Just a few months ago, Ohio became the latest state to adopt auto-enrollment.​

2️⃣ Push financial wellness programs

According to 2020 data from MissionSquare Research Institute, only 29% of state and local governments have a financial wellness program, but 68% of respondents said they would participate in one. Their top financial education topic? Retirement planning.

3️⃣ Redesign plans with the participant in mind

This includes matching contributions, broader eligibility provisions, and easy enrollment (even if auto-enrollment isn't available).

While other state-sponsored plans — like 457s and 401(a)s — are on the rise, the 403(b) could easily compete with a few key changes like these.

We here at Better Benefits have been focusing more on retirement content for a hot second now, and we want to know what you think! Take this quick survey to help us help you stay informed and engaged — your input means the world to us!

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