NEW YORK--(BUSINESS WIRE)--Concerns about turning current savings into retirement income jumped significantly year-over-year. Overall confidence in retirement, which previously was on an upward trend, flatlined in 2019, according to BlackRock’s (NYSE: BLK) latest DC Pulse Survey of more than 1,000 DC plan participants and more than 200 plan sponsors.
When it comes to the critical task of turning savings into retirement income, six in 10 workers (62%) are worried, up 14 percentage points from last year (48%). At the same time, workers’ confidence in their progress stayed relatively flat after several years of growth. Sixty percent say they are on track to retire with the lifestyle they want, compared with 61%, 56%, and 52% in the three previous years.
“Workers continue to feel challenged on how best to achieve a financially secure retirement,” said Anne Ackerley, Head of U.S. and Canada Defined Contribution at BlackRock. “It’s one of the toughest financial hurdles facing workers today - how to take hard-earned savings and create lasting income through retirement. Even when workers are largely upbeat over their current financial situation, the thought of a secure retirement weighs heavily.”
Women More Worried – And Pragmatic - About Retirement Prospects
According to the survey, women in general are more concerned about their retirement: Just 50% feel they are on track, compared with 69% of men. Yet a growing set of evidence suggests that women may also be more pragmatic in taking steps to alleviate their concerns.
For example, about seven in 10 women (71%), compared with 59% of men, say it would be helpful if their employer “automatically reallocates their assets to more appropriate investments for someone their age,” leaving the complicated task of allocating assets to investment professionals to maintain the plans best thinking.
Their pragmatism also extends to retirement income: 45% of women say retirement income is extremely important when selecting a retirement investment, as opposed to only 38% of men. In addition, women are less likely to leave their plan after retirement (52% vs. 59% of men), which has shown to have many benefits such as competitive fees and fiduciary oversight of investments.
“Women are more likely to welcome guidance from their employer, take advantage of staying in their plan after retirement, and have a healthy respect for the difficult task of saving and investing for the future,” said Ackerley. “This is equal parts about providing tools and empowering women with the right resources, and breaking down outdated narratives around women and investing.”
Survey results show that women are less likely than men to agree that their employer’s communications “help me understand the benefits of my plan” (58% vs. 69%) and “help me decide how to manage my plan’s retirement savings” (46% vs. 55%), suggesting that existing communications do not reflect women’s concerns, needs and interests.
Employers Step Up – Choose Target Date Funds as Saving and Spending Solution
To help address retirement concerns, target date funds (TDFs) are increasingly viewed by employers as an effective tool across the investment lifecycle. Of all options, employers are most likely to actively encourage participants to look to TDFs to support their retirement needs – significantly more so than last year (56% vs. 39%). Four in 10 (39%) sponsors say they have changed or added TDFs in the past 12 months, one of the largest reported changes since the survey’s inception, as sponsors increasingly consider participant outcomes.
About eight in 10 sponsors agree that “plan participants would benefit from a TDF that has a feature that generates guaranteed retirement income.” Putting that belief to work, 78% agree that “my plan’s current TDF can be used as a decumulation vehicle for participants in retirement” (vs. 57% last year).
This is good news for participants who increasingly look to their workplace plan for solutions: Eight in 10 agree that it would be helpful if their employer could provide secure income-generating options in the plan. About two-thirds (65%) say they would save more for retirement if their plan had an option providing guaranteed income.
“TDFs are now the most likely option plan sponsors choose to support their participants’ retirement needs. Through their use in both the saving and spending phase, TDFs can help take the guesswork out of retirement and have proven to be an effective way to ride out recent volatility,” said Ackerley.
Indeed, market turbulence is on the minds of plan sponsors, according to the survey, with about three quarters (76%) anticipating more volatility this year. Some of the steps these sponsors are considering or have already taken include adding an investment option that explicitly seeks to reduce volatility (46%) and providing participant education about managing volatility (41%).
More Employers Offer ESG, Driven by Elevated Demand from Millennials
Employers have also broadened access to investment options that let employees express their convictions regarding environmental, social and governance (ESG) issues. More than a third (36%) of employers now offer an ESG investment option in their DC plans, up from 26% last year.
Most plan sponsors (71%) agree ESG strategies can increase employee participation; this seems to hold especially true for Millennials, who are more likely to agree that they would save more for retirement if “my plan had investment options that support environmental and social causes” (48% vs. 30% of other participants).
More than six in 10 (62%) participants say it is important to have investing options that support such causes (vs. 49% last year); interest is especially strong among Millennials (76%, vs. 57% of Gen X and 55% of Baby Boomers).
Employees Eager to Do Better, Seek Tools to Help
The need for participant education is clear: 56% of participants say they would save more if their plan offered more education on planning and savings, and 62% said digital tools could help them stay on track.
Employers are well positioned to deliver on these needs, the survey suggests, with many enjoying considerable “good will” among employees: Nearly 6 in 10 participants say that they trust their employer to make good decisions about the investments offered in their plan.
“There is a massive opportunity to improve the lives of millions of workers through tools and resources that help participants make better saving and spending decisions,” Ackerley says. “As an industry, we must reimagine retirement to make the process of saving for the future easy and intuitive. We all have a stake in preserving financial security once employment ends,” Ackerley noted.
BlackRock helps investors build better financial futures. As a fiduciary to investors and a leading provider of financial technology, our clients turn to us for the solutions they need when planning for their most important goals. As of December 31, 2018, the firm managed approximately $5.98 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 228 large defined contribution (DC) plan sponsors and 1,033 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.
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