Our work confirmed that most of the assets of lower-income families are in cash accounts and not invested in the market. In fact, 4 in 10 Americans are not invested at all in capital markets.2 This matters because investing in an age-appropriate allocation, such as a target-date fund, can dramatically improve retirement readiness.3
Employer-sponsored plans are often a worker’s entry point into investing. It’s well-documented that workers who participate in and are able to stay in well-designed plans have a greater chance of funding retirement.
But not everyone has access to or stays in a well-designed plan throughout their adult lives. In fact, roughly half of U.S. families don’t have access to workplace retirement plans.4
We need to work on solutions that help workers maintain their savings and investment allocations as they transition between jobs and seasons of life.
The retirement savings journey is not linear, even for those with access to retirement plans. Many will face job changes, periods of unemployment, and competing financial priorities that may interrupt or slow their ability to save.
This may be particularly true for lower- and middle-income workers who may face more income volatility and more difficulty saving than higher-income earners and, as a result, won’t enjoy the full benefits of compounding in their retirement investment portfolios.