Employees at large companies have better access to retirement benefits than employees at small companies, but small companies are rapidly improving their employees’ retirement confidence, according to the 16th Annual Transamerica Retirement Survey. The survey, which included responses from 4,550 workers nationwide, defines a small company as having 10-499 employees and a large company as having 500 or more employees.
74% of employees at large companies have access to a 401(k) or other self-funded plan by their employers, compared to 56% of employees at small companies. Unsurprisingly, employees of large companies are more likely to rely on their retirement accounts as a primarily source of income, 40% compared to 34%. The participation rate for those offered a 401(k) or similar plan is around 80% for both groups. The plan contribution rate, however, is higher for employees at large companies, 8% of their annual pay, compared to small company employees’ 7%.
Despite differences in access to retirement benefits, employees at large and small companies have similar sentiments about retirement. 60% of all employees feel “somewhat” or “very” confident about retirement, and both groups have similar expectations about age of retirement. Concerns about retirement are consistent as well. 80% of both groups agree that their generation will have a harder time achieving financial security than their parent’s, and 75% are concerned that Social Security will not help them.
While small companies still have some catching up to do in terms of offering competitive retirement benefits, multiyear data suggests that small companies have made more gains in the last few years in improving employees’ retirement confidence. Employees at small companies who felt “somewhat” or “very” confident about retirement grew 23% from 2011 to 2015; the cohort that felt “very” confident grew 88%. In comparison, employees at large companies who felt “somewhat” or “very” confident about retirement grew 13%; the cohort that felt “very” confident grew just 17%.
It is clear that employees at both large and small companies need more financial guidance. The majority of workers “guessed” at their retirement savings needs; less than 10% used a retirement calculator. 61% of all employees agree with the statement “I would like to receive more information and advice from my company on how to reach retirement goals.” However, a startlingly 41% of small company employees and 37% of large company employees agree with the statement “I prefer not to think about or concern myself with retirement investing until I get closer to my retirement date.” Interestingly, employees at small companies are somewhat more likely (37%, compared to large company employees’ 33%) to use a professional financial advisor to help manage their retirement savings. Yet, the data suggests that the vast majority of employees at large and small companies could benefit from either more advice on how to achieve financial goals or simply guidance on how to start thinking about retirement investing.