Background: In January 2023, the DCIIA RRC collaborated with PGIM to analyze a data set extracted from Prudential’s Financial Behavior and Financial Wellness Profiling Tool. The RRC’s primary research question was to learn what drives defined contribution plan savings rates. Consumers voluntarily visited the Prudential website to answer several questions about their financial behavior, including their self-perceived financial wellness, and, in return, received an automated assessment of their financial situation. The data set contained 27,000 responses and the RRC utilized multivariate analysis.

Findings: The three strongest drivers of deferral rates were, in order of highest to lowest:

1. Age

2. Perceived financial wellness (as gauged by months of unemployment that could be tolerated)

3. Discretionary income

Following these top three drivers, the next highest predictors included workers’ perceptions of the adequacy of their retirement savings, their estimated credit score, their ability to pay bills on time, and gross household income.

Bottom Line: Age emerges as the most influential factor with deferral rates, where saving rates begin gradually growing around age 32. While promoting early savings is important, it is known that young people often have conflicting financial goals. Constant messaging is unlikely to overcome this challenge, and higher deferral rates will eventually emerge as receptivity to this message grows or conflicting financial goals are resolved. Gross household income appears to have a lesser impact on deferral rates than discretionary income and their perceived financial wellness. This suggests that saving for retirement is seen as a secondary priority after fulfilling basic needs and wants. The remaining factors pertain to financial wellness and self-perception, which can be enhanced through workplace financial wellness programs.