Lack of Access Is a Crucial Factor to Preventing Retirement Savings

Sep 13, 2023
  • BlackRock

Key points


Saving behavior driven by access

BlackRock and Human Interest have found that American workers earning less than the national average are not saving due to lack of access to saving tools. Broadening access requires an intuitive and automated approach to retirement savings.


Those with access save more

A median income worker without access to an employer-sponsored retirement savings benefit is calculated to potentially have approximately $624,400 dollars less than a median income worker with access to a Human Interest platform putting away 7.4% of their income.


Emergency savings support a further boost

Emergency savings programs can also help provide a powerful boost to retirement savings for lower income workers. BlackRock found that those with emergency savings are more than 70% more likely to contribute to their defined contribution retirement plan and are 13 times less likely to take a hardship withdrawal.

BlackRock and Human Interest have found that a primary reason lower income workers are not saving for the future1 is because they do not have access to intuitive and automated savings tools, not because they do not want to or cannot afford to.

In 2017, a Federal Reserve report found that 40% of Americans couldn’t cover an unexpected $400 expense.2 Several years later, that figure remains relatively unchanged at 37% - and for people living on low-to-moderate incomes, it’s 58%.3 Certainly, it’s hard to save for tomorrow if you’re worried about making ends meet today. But, when workers are provided access to the right savings tools and opportunities, the outlook can change.

Over the past four years, BlackRock’s philanthropic Emergency Savings Initiative ran 43 financial security studies and pilot programs, created specifically with the goal of reaching low-to-moderate income households across the United States. Looking across these projects, it’s clear that, when people have access to savings programs, they are empowered to set aside money for the future.

Human Interest data supports this. When workers are provided access to retirement tools, Human Interest has found the rates at which people are saving are higher than may have been previously thought possible - especially among lower income levels. Workers on Human Interest’s platform who are earning less than $60,000 annually save 7.4%4 of their income, compared to 0.9% savings rate5 for those without access to a retirement benefit.

The difference in financial security between workers with and without access to a retirement benefit is stark (Figure 1). With an average savings rate of 7.4% at Human Interest, a median income worker on Human Interest’s platform6 may be able to save $710,900 by the time they reach 65. By contrast, a median income worker without access to a retirement benefit and saving only 0.9% may have a $86,500 nest egg, which is $624,400 (or about eight times) less than their Human Interest counterpart in retirement.

Figure 1: Access to the right tools creates the opportunity for financial security

Average savings rate Nest egg at 657
Median income8 workers with access to a Human Interest 401(k) 7.4% $710,900
Median income worker without access to a retirement benefit 0.9% $86,500
Difference 8X 8X

Source: For illustrative purposes only.

BlackRock’s Emergency Savings Initiative research further finds that bolstering a retirement plan solution with an emergency savings program can amplify results. Across various pilot programs, those with emergency savings were found to be over 70% more likely to contribute to their defined contribution retirement plan.9 Moreover, those with emergency funds were found to be 13 times less likely to take a hardship withdrawal than those with inadequate savings.10 The research on this point is clear: when combined with a retirement solution, emergency savings programs can help people get started and save consistently for retirement.

Beyond providing access to savers, it is also important to make it as easy as possible for an employer to offer a 401(k) plan. Human Interest studied the behaviors of their customers, which are small and medium sized businesses, and built a solution called the Fast Track 401(k)11 that empowers business owners to purchase and launch a plan in 10 minutes or less.

The importance of access to retirement savings vehicles for employers and employees alike cannot be overstated. It is why BlackRock invested in Human Interest earlier this year, and it is why both organizations remain jointly committed to accelerating progress on helping underserved populations save for retirement.