The concept of retirement often fills people up with the fear of uncertainty. The loss of a regular cash flow can be a scary feeling, especially with rising prices and inflation in the market. Thankfully with the media campaigns, an increasing amount of people are turning towards a healthier lifestyle and better retirement plans that include getting various backup plans in the form of insurance coverage to account for the financial instability.

However, the basic question arises how to push people into following a wiser and a more promising post-retirement life.

While many people are fast recognizing the need for having a good life insurance policy to ensure the family’s financial safety after the unfortunate demise of the primary bread-earner, there still very few who take constructive steps and invest in good retirement plans.

Most plan sponsors resort to automatic featurettes to provide good retirement plan to the employees and help them to take a positive step towards having a good plan for their retirement. Although, the wheels have been set in motion and the employers have taken the first step, a greater push is needed to produce better results.

In the usual scenario, sponsors fix the deferral rate at 3 percent. They fix the default rate at the minimum because they believe that if they fix the rate any higher, the gross take-home salary for the employees would decrease which would ultimately lead to the dissatisfaction of the employees which would make them leave the company for better opportunities. However, this line of thought is not correct. While the sponsors have taken a positive step towards securing the post-retirement lives of their employees, such a low deferral rate hardly helps to solve the problem and does not contribute much to the savings account.

Most sponsors fail to conceive the fact that most of the times the participants are more than eager to walk the extra mile to save up for their retirement than the meagre deferral rate would let them allow. A number of research studies have revealed that contrary to what most sponsors feel, a higher deferral rate does not automatically lead to employee dissatisfaction. In fact, it often has the opposite effect where the employee builds a trust on the organization and feel that they are invested in the future of their employee. This means that the fears of the sponsors are basically for nothing.

The research showed that the deferral rate of anywhere from 6 percent to 8 percent actually led to the appeasement of the employees. In fact, deferral rate as high as 11 percent only led to a slight drop in enrollment in the organization. This is a stark contrast of results that the sponsors were led to believe so far.

These positive results give the sponsors the impetus to hike up the deferral rates that would in turn help to secure the retired lives of their employees and contribute considerably to their savings and insurance plan.


The employees are also more likely to adhere to this healthier financial investment if they are nudged by the organization or the sponsors into following the right path. By cultivating this positive financial outlook in the employees, they are not only financially securing their future, but also increasing the employee satisfaction in the long run.