Many 401(k) plan participants don't know how they can maximize their success rate as defined as attaining an 80 percent real replacement of income from Social Security and their 401(k) plan. They need help and that's where advisors can add value to the client relationship.

In its recently published study entitled, "The Impact of Auto-enrollment and Automatic Contribution Escalation on Retirement Income Adequacy," the Employee Benefit Research Institute (EBRI) analyzed how four factors affect the success rate of individuals' retirement funds. The four factors are:

• Maximum level of employee contributions allowed by plan sponsor (6, 9, 12 and 15 percent of compensation)
• Annual increase in contributions (1 vs. 2 percent of compensation)
• Employee opt out/in of automatic contribution escalation
• Employee remembrance of the level of contribution from a previous job (hence, they do not opt out of automatic escalation)

Participants were divided into income quartiles and the four quartiles were compared against how the four factors affected the participants' success rate.

The lowest participant success rates are experienced by those who don't remember their previous contribution rates when changing jobs, who opt-out of automatic escalation of their 401(k) contributions, who limit the automatic contributions to 6 percent of compensation and who increase the contributions by only 1 percent per year.

On the other end of the spectrum, the highest success rates occur by participants who remember their previous contribution rates when changing jobs, who do not opt-out of automatic escalation, who participate in plans that allow the automatic contribution to increase to 15 percent of compensation and who increase the contributions by 2 percent per year.

Participants with low success rates can increase their likelihood of attaining success if they adopt one of the factors from the high success rate scenarios. According to the EBRI report, the most significant factor in determining success was to increase employee contribution limits, which was approximately 10 times more beneficial than the next leading factor in success. However, by including one or more additional factors, such as automatic escalation of contributions, can more the double the impact.

When all four factors of the high success scenario were applied, participants saw the greatest impact on their retirement success rate. Participants from the lowest income quartile saw the probability of success increase by 79 percent, while participants from the highest income quartile realized a 64 percent probability of success in achieving the 80 percent replacement rate.

When attempting to attain a plan-wide success rate, advisors can use different communication strategies for the employees, depending on which of the four factors are needed to achieve retirement success.

Not only is auto-enrollment becoming an increasingly important factor in the success of participants attaining their retirement goals, but auto-escalation of contributions is also critical to participants replacing 80 percent of their income in retirement. As financial advisors, we must keep all of these factors in mind when guiding our clients towards their employees' successful financial future.

To access EBRI's report, The Impact of Auto-enrollment and Automatic Contribution Escalation on Retirement Income Adequacy, go to www.ebri.org.