What You Save Versus How You Save: Study Finds Savings Rate Is 45 Times More Important Than Asset Quality

Believe it or not, the assets your employees place their 401(k) money into are not the most important factor in determining their financial success at retirement—not by a long shot. As reported by The ASPPA Journal, an employee's retirement savings rate is about 45 times more important than the quality of the assets they are investing in.

Unfortunately, most people don't know this because the investment industry spends a lot more time talking about asset quality than it does about the savings rate. But the importance of the saving rate is obvious: If no money is going into your company 401(k) plan, then it doesn't matter how good the return is. Anything times zero equals zero.

Saving is an employee's choice. The key to making it happen is behavior modification. When a worker is motivated to save, that provokes other positive money behaviors like getting out of debt, living below their means, and taking advantage of company retirement plans.

What's more, about 24% of a normal family's take-home pay goes toward consumer debt. The choice to go into credit card debt, take out a car loan, or use just about any other type of debt is completely up to the person. When your employees change their spending and saving habits, more of their salary stays with them. They can then make better choices to utilize their company savings tools. Getting out of debt and saving happens with a plan.

The company that invests in the financial wellness of its employees helps to change not only their saving and spending habits, but their very lives. Workers become more productive and less distracted. Companies become more profitable and have less turnover. The power to start that chain reaction rests with you.

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