NEW YORK--(BUSINESS WIRE)--Strong market performance has helped fuel increasing optimism among American workers about their retirement prospects – but many employers don’t share their upbeat view, according to the latest DC Pulse Survey from BlackRock (NYSE: BLK). BlackRock surveyed 1,000 participants in defined contribution (DC) retirement plans and more than 200 plan sponsors.
Sixty one percent of DC plan participants surveyed say they are on track to retire with the lifestyle they want. Nine in 10 say that they are confident in their overall financial situation. However, participants cite transforming accumulated employment savings into ongoing retirement income as a top concern.
For many participants, the performance of their investments is making a considerable difference. Nearly half of participants (49%) who feel they are on track for retirement point to their investments performing up to their expectations as grounds for their confidence, up 20% from just two years ago.
But many sponsors view things differently. They see a rising number of plan participants who will have to delay retirement due to saving shortfalls, estimating that more than half of their participants (54%) will have to postpone retirement, up from 34% in 2016.
“It remains to be seen if recent volatility has shaken participant confidence, but for the most part DC plan balances have retained the benefits of a multi-year bull market,” said Anne Ackerley, Head of BlackRock’s U.S. and Defined Contribution Group. “Nevertheless, confidence can be empowering, and now is a perfect time to build on that confidence through action that can help keep participants on track regardless of the market cycle, such as increasing savings or building a retirement income strategy.”
Participants Concerned About Managing Retirement Spending
As confident as they seem to be, participants express some substantive concerns regarding how to effectively address their spending needs in retirement.
Seven in 10 participants agree that their generation won’t have the level of retirement income that retirees formerly had. Many are concerned specifically about the need to transform accumulated savings into ongoing income: 51% agree that “it’s difficult to know how my retirement savings will translate into monthly income at retirement” and nearly half (48%) say “the thought of having to generate my own retirement income worries me.” And for nearly half (49%) of participants, their primary retirement goal is simply not to outlive their money.
Historically, most retirees simply haven’t spent down their savings as quickly as anticipated, according to recent research by the BlackRock Retirement Institute with the Employee Benefit Research. On average, most retirees across all wealth levels have retained about 80 percent of their pre-retirement assets -- or have even grown their assets -- after almost two decades in retirement.
However, BlackRock believes that future retirees many not have the option of leaving principal largely untouched. “From here on, changing market conditions and the erosion of guaranteed retirement benefits will almost certainly demand that individuals get much more comfortable with spending down their accumulated assets to generate a secure income stream,” said Ms. Ackerley. “Our survey makes clear that plan participants want their employers to help them manage the saving-to-spending transition – and sponsors agree they need to deliver this help.”
About 90% of participants agree that their plan account should include an estimate of the annual dollar amount or percentage they could safely withdraw in retirement. About the same number of plan sponsors say that their company feels responsible for helping to support participants’ retirement spending needs.
Reflecting this sense of responsibility, 83% of sponsors have taken some action to encourage participants to keep their assets in the plan post-retirement, with many adding retirement income investment options (35%) or providing guidelines on withdrawal rates (33%).
Yet, while plan sponsors expect about 50% of their participants to stay in the plan for part or all of their retirement, only half offer tools to help participants understand what they could draw down from their savings in retirement (an additional 33% say they are considering doing so in the future).
Target Date Funds Can Offer a Spending Solution
Target date funds (TDFs), long utilized in DC plans to help participants save and invest for retirement, have untapped potential to support retirement spending, the survey suggests.
Sponsors are more likely (39%) to direct participants to TDFs than to any other plan option when it comes to finding support for their retirement spending needs.
But BlackRock’s survey findings indicate that sponsors don’t yet view any of their options as a focused spending solution. Most sponsors (93%) say their plan currently offers no investment options specifically designed to help retired participants address spending needs – suggesting that more focus may be needed on the sponsor side in re-tooling the TDF specifically as a “decumulation” option.
“Plan sponsors increasingly can deploy TDFs to help individuals spend their retirement savings in ways that make most sense given market conditions, actual spending needs, and anticipated longevity,” said Ms. Ackerley. “This approach merits a close look by any plan sponsor who wants to provide participants greater comfort that spending will not overwhelm savings over time – and that a lifetime of saving will yield the lifestyle they truly want in retirement.”
Engagement with Saving Process Also Builds Confidence
The good news is that, for many participants, strong markets aren’t the only driver of optimism; active engagement with the retirement savings process also plays a significant role in shaping their view. Participants who feel they’re currently on track for retirement also attribute their success to such positive behaviors as “I’m saving the amount that allows me to get my employer’s maximum match” (41%) and “I’m saving the maximum amount of money I can at all times” (34%).
“Securing their employer’s matching contribution – in addition to being a key confidence builder – offers employees significant motivation to save,” said Ms. Ackerley. “Indeed, some sponsors are taking steps to build this motivation, with adjustments to the match that can encourage participants to save even more.”
Over the past two years, 54% of sponsors have made adjustments in plan features such as contribution levels and investment options to support savings; of these, changing the company match for employee plan contributions (17%) is among the top adjustments, along with raising the default contribution rate (20%) and selecting a new default investment alternative (18%).
“Many sponsors have turned their concern about retirement preparedness into action specifically focused on plan features that meaningfully improve participants’ ability to accumulate needed savings over their working lives,” said Ms. Ackerley. “But participants clearly also need more support in understanding how to best manage their financial lives after employment ends.”
BlackRock helps investors build better financial futures. As a fiduciary to our clients, we provide the investment and technology solutions they need when planning for their most important goals. As of December 31, 2017, the firm managed approximately $6.288 trillion in assets on behalf of investors worldwide. For additional information on BlackRock, please visit www.blackrock.com | Twitter: @blackrock | Blog: www.blackrockblog.com | LinkedIn: www.linkedin.com/company/blackrock.
About the DC Pulse Survey
The BlackRock DC Pulse Survey is a major research study of over 200 large defined contribution plan sponsors and 1,000 plan participants in the U.S. executed by Market Strategies International, an independent research company. The plan sponsors who were interviewed had at least $300 million in assets, with nearly 40% of the respondents serving in benefits or human resources roles, and the rest in finance, investment or business management for their organizations. The plan participants surveyed were employed full-time and participating in their employer’s 401(k) or 403(b) plan, with at least $5,000 in assets in their current account. All respondents were interviewed using an online survey. For the sponsor sample, the survey’s margin of error is +/- 6.5 percentage points; for the participant sample, it is +/- 3.1 percentage points.
This communication is for information purposes only and does not constitute a financial promotion, marketing communication or an offer or invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer. Accordingly, this material does not constitute an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not lawful or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. It is your responsibility to be aware of the applicable laws and regulations of your country of residence. This information is confidential and was prepared solely for the named recipient. It may not be used or published without the prior consent of BlackRock.
Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: 020 7743 3000. Registered in England No. 2020394. For your protection telephone calls are usually recorded. BlackRock is a trading name of BlackRock Investment Management (UK) Limited.
Issued in the Netherlands by the Amsterdam branch office of BlackRock Investment Management (UK) Limited: Amstelplein 1, 1096 HA Amsterdam, Tel: 020 - 549 5200.
In Australia, issued by BlackRock Investment Management (Australia) Limited ABN 13 006 165 975 AFSL 230 523 (BIMAL). This material is not a securities recommendation or an offer or solicitation with respect to the purchase or sale of any securities in any jurisdiction. It provides general information only and does not take into account your individual objectives, financial situation, needs or circumstances. Before making any investment decision, you should therefore assess whether the material is appropriate for you and obtain financial advice tailored to you having regard to your individual objectives, financial situation, needs and circumstances. This material is not a securities recommendation or an offer or solicitation with respect to the purchase or sale of any securities in any jurisdiction. This material has not been prepared specifically for Australian investors. It may contain references to dollar amounts which are not Australian and may contain financial information which is not prepared in accordance with Australian law or practices. This material is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. BIMAL is a part of the global BlackRock Group which comprises of financial product issuers and investment managers around the world. BIMAL is the issuer of financial products and acts as an investment manager in Australia.
In Hong Kong, this press release is issued by BlackRock Asset Management North Asia Limited. This press release and the BlackRock website mentioned herein have not been reviewed by the Securities and Futures Commission of Hong Kong.
In Singapore, this information is issued by BlackRock (Singapore) Limited (company registration number: 200010143N).
In Korea, this information is issued by BlackRock Investment (Korea) Limited. This material is for distribution to the Qualified Professional Investors (as defined in the Financial Investment Services and Capital Market Act and its sub-regulations) and for information or educational purposes only, and does not constitute investment advice or an offer or solicitation to purchase or sells in any securities or any investment strategies.
In Latin America and Iberia: this material is for educational purposes only and does not constitute investment advice nor an offer or solicitation to sell or a solicitation of an offer to buy any shares of any Fund (nor shall any such shares be offered or sold to any person) in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities law of that jurisdiction. If any funds are mentioned or inferred to in this material, it is possible that some or all of the funds have not been registered with the securities regulator of Argentina, Brazil, Chile, Colombia, Mexico, Panama, Peru, Portugal, Spain, Uruguay or any other securities regulator in any Latin American country and thus might not be publicly offered within any such country. The securities regulators of such countries have not confirmed the accuracy of any information contained herein.
BlackRock México, S.A. de C.V., Asesor en Inversiones Independiente (“BlackRock México”) is a Mexican subsidiary of BlackRock, Inc., registered with the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, “CNBV”) as an independent investment advisor (asesor en inversiones independiente) under the registration number 30088-001-(14085)-20/04/2017, thus authorized to render Investment Advisory Services. The registration of BlackRock Mexico in the Investment Advisors Registry (Registro de Asesores en Inversiones) does not imply certification on the compliance by the investment advisors with the applicable laws and regulations or the accuracy or correctness of the information contained herein. Please note that the CNBV exclusively oversees the provision of securities portfolio management services when making investment decisions in the name and on behalf of third parties, as well as services consisting in providing individualized investment advice on Securities, and the analysis and issuance of individualized investment recommendations, thus it is not entitled to supervise or regulate any other services provided by investment advisers.
Investment involves risks. Past performance is not a guide to future performance and should not be the sole factor of consideration when selecting a product. All financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed. Capital at risk. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested. Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.
The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock or any part thereof and no assurances are made as to their accuracy.
© 2018 BlackRock, Inc. All Rights reserved. All other trademarks are those of their respective owners. BLACKROCK, BLACKROCK SOLUTIONS, iSHARES, BUILD ON BLACKROCK, SO WHAT DO I DO WITH MY MONEY and the stylized i logo are registered and unregistered trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners.