New research from the LIMRA Secure Retirement Institute reveals that workers from for-profit and not-for-profit organizations will save only enough in their defined contribution (DC) plans to receive the full company match.

“The study demonstrates the powerful incentive a company match can have on employee behavior,” said Michael Ericson, LIMRA Secure Retirement Institute analyst, in a press release. “Institute research shows nearly half of American workers believe they are not saving enough for retirement, and four in 10 working households have less than $25,000 saved for retirement.

“Plan providers can help employers increase their employee’s savings behavior by recommending a ‘stretch match’ strategy, which would require an employee to save a higher percentage to attain the full company match.”

A stretch match raises the match threshold from 6% percent usually to 10% of deferred pay. To keep the cost of an employer's plan contribution the same, the plan reduces the company match from 50% on the dollar to perhaps 30%, explains a BLR article. However, this stretch match still benefits workers in the long run.

The study, which compared workers from not-for-profit and for-profit companies, found that only four in 10 workers (both at not-for-profit and for-profit companies) consider themselves “savers.” And of those who have access to a DC plan, 20% were not contributing to their employer’s DC plan at all.

A LIMRA Secure Retirement Customer Survey fact sheet found that a large majority of workers (78%) recognize their personal responsibility to save for retirement. Also, those employees who do contribute to a DC plan are more likely to believe they have a personal responsibility to save (84%).

However, the new research shows that for-profit workers who do not contribute to their workplace DC plan were more likely to say they cannot afford to do so or they have competing saving priorities, compared with not-for-profit workers (67% versus 53%).

Institute researchers found more than a third of Millennial workers in both the not-for-profit and for-profit sectors are saving 10% or more (34% and 35% respectively). Only 27% of Baby Boomers and 28% of Gen-X not-for-profit workers are saving at that rate.

In the for-profit sector, Baby Boomers and Gen-X workers save a bit more than their Millennial counterparts—36% of Boomers and 35% of Gen-X workers are saving 10% or more in their retirement plans.

Even with robust saving habits, the preretirees surveyed have no plan on how they will withdraw assets from their DC plans once they retire, and just one-third have calculated their savings and expenses in retirement. The study found nearly half of preretirees said they plan to withdraw 9% or more of their assets each year in retirement. Most financial experts recommend drawing no more than 4% a year—and in low-interest rate environments, maybe less.

"With longevity at an all-time high, retirement can last more than 3 decades," explains Ericson. "Understanding how to safely draw down savings becomes critically important for retirees. Not-for-profit workers are more likely to have a pension income along with their DC plan, but most for-profit workers will not have one."

Ericson adds that professional advice can be advantageous to both types of workers. The key is for companies to help each group of workers understand the unique challenges and obstacles they face in saving for their retirement.