Employers looking to spur their employees to save more for retirement might want to consider enticing them with the prospect of retiring early.
It's a motivator that displayed encouraging early promise for the Federal Retirement Thrift Investment Board, the administrator of the federal government's $720 billion Thrift Savings Plan.
In an initiative to coax its participants to contribute more to the plan, the FRTIB last year sent participants personalized communications that detailed how much more they would need to save each pay period to retire one year earlier.
"Who doesn't want to work for one less year?" Elizabeth Perry, a social scientist with the Thrift Savings Plan in Washington, asked rhetorically at Pensions & Investments' Defined Contribution West Conference in San Diego in October, during a panel discussion on ways to maximize participant engagement.
The personalized communication went to roughly 30,000 participants under the age of 55 who were saving less than 5% — or not at all. The estimates of how much more they would need to save in order to work one less year was based on their age and current salary. A 33-year-old participant earning $65,000 per year, for example, would need to save roughly $27 more per biweekly paycheck to replace a year of his or her current salary, according to FRTIB projections.
A preliminary look at the results were encouraging, particularly among participants age 35 and older who weren't contributing. Participants in this group were 8% more likely to start contributing after receiving the outreach, Ms. Perry said in an interview a few weeks after the conference.
"We did see a positive increase, which was exciting," she said, referring to participants who prior to the email had not been contributing to their TSP accounts.