J.P. Morgan Retirement Strategist, Pamela Hess, draws on recent analysis in our Retirement by the Numbers (RBN)¹ report to discuss how changes to DC plan participant behavior, and the ways the industry supports them, can drive stronger retirement outcomes.

For most Americans, achieving retirement security means overcoming two major hurdles—closing the gap between what they are saving and what they will need, and managing the liquidity pressures and setbacks that debt and short-term financial needs can create.  

Our latest RBN analysis provides compelling insights into the web of financial pressures workers face—and what the DC industry can do to help participants move closer to their retirement goals by supporting them in tackling two critical challenges.

Challenge 1: Closing savings gaps

Although most workers understand the importance of saving for retirement, the reality is that average retirement plan contribution rates remain consistently below recommended levels across all age and income groups:

• Average savings rates for young workers start out below 5% and peak at just 8% for Baby Boomers—well below the 10% to 15% contribution rates most experts recommend
• Indeed, only 15% of all participants achieve a double-digit savings rate; even among high-earners, only 22% save in the double-digit range
• Time is a powerful ally of those saving for retirement. However, when early contributions are delayed (whether due to procrastination, inertia, lower starting salaries and/or competing financial obligations) the result is not only a smaller balance, but also a heavier financial burden and increased anxiety later in life

Participants themselves recognize these shortfalls:

• In our 2024 Defined Contribution Plan Participant Survey Findings, 63% said they need to save more to achieve a financially secure retirement
• Notably, 35% of participants said automatically increasing contributions by 1% a year (with an option to cancel at any time) would be the best way to motivate them to contribute more (aside from salary increases)
• Additionally, 89% of participants who are already enrolled in an automatic escalation program express satisfaction with their experiences

Note: Even a small increase in savings rates can lead to substantial gains: Increasing contributions by just 1% early in a career can add up to an extra $84,000 by retirement age, which is equivalent to nine years of average Medicare-related expenses.

How the DC industry can help: Boost earlier participation and higher contribution rates through more strategic, higher-impact defaults—auto-enroll at a meaningful starting rate and auto-escalate contributions by 1% annually to double-digit savings rates—supported by periodic re‑enrollment. Pair these features with practical financial‑wellness support for budgeting and managing competing priorities, so workers can balance today’s needs with tomorrow’s retirement goals.

Challenge 2: Managing day-to-day liquidity needs

Workers typically reach their peak earning years between ages 40 and 55—a time period when competing financial pressures mount. For example, the need to fund higher education for children or to achieve important personal goals.

Experiencing a financial shock during this period—whether due to external/market forces or the result of personal issues—can be destabilizing, often forcing households to choose between racking up high-interest credit card debt or dipping into their retirement savings. Or both.

Indeed, our research found one in three plan participants could not absorb a spending spike with their current income. Without adequate emergency funds to cushion the blow, retirement savings often become a primary source of immediate liquidity. And, in fact, nearly one in five plan participants today has an outstanding retirement plan loan:

• Loan usage peaks midlife; among 45 to 49-year-olds, 23% of participants have a plan loan outstanding
• While loan amounts as a percentage of balance decline with age, the dollar amounts are significantly higher averaging $8,976 (17%) for Gen X and $8,793 (13%) for Baby Boomers
• For Gen Z workers, the dollar amount borrowed is smaller, averaging $2,644, but represents a much larger portion of their retirement balance, at 24%

Moreover, credit stress often coexists with plan loan usage, signaling broader cash-flow stress for many workers:

• Nearly one-third (30%) of Gen Z participants carry debt exceeding 50% of their credit limits, drifting only slightly lower to 27% of Millennials, 26% of Gen X and 21% of Boomers
• Participants with high credit card utilization (utilizing over 50% of their credit limit) also generally contribute less to their plans and have much lower account balances. For example: the average retirement account balance for Baby Boomers with high credit card utilization is about 40% lower than those without—a gap of $58,576

How the DC industry can help: Offering comprehensive financial wellness programs, including budgeting, debt counseling and emergency savings solutions (either in or out of the DC plan), can help participants avoid tapping into their retirement accounts when financial shocks occur.  Pair these with targeted, well-timed communication, and simple, outcome-focused nudges (for example: illustrate how small, steady increases add up), along with easy on-ramps back into savings after interruption. It’s also important to evaluate target-date fund glide path design closely, especially around critical points on the retirement journey, such as the years leading into retirement.

In summary

A critical first step in transforming retirement plans from emergency piggy banks back into vehicles of long-term economic confidence is to understand the complex interplay of savings, debt and liquidity. And this will require a shift from savings-only thinking to a financial wellness mindset that helps people balance today’s needs with tomorrow’s goals—supported by higher-impact defaults, targeted education and thoughtful plan design.

To learn more: See our Retirement by the Numbers research report.  

¹For more than two decades, J.P. Morgan Asset Management has closely examined this question, analyzing real-world saving and spending patterns to provide actionable insights into how to help more people achieve the retirement they’ve earned.

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