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Insights: Trends, Research, and White Papers
401k Assets Top $7 Trillion at 2023 Mid-Point401k plans held $7.2 trillion in assets as of June 30, 2023, comprising the lion's share of total U.S. defined contribution plan assets that hit $10.2 trillion at the end of the second quarter, up 4.1% from Q1 2023 ($6.9 trillion). The figures are from quarterly retirement data tables in the Investment Company Institute's "The US Retirement Market, Second Quarter 2023," released Sept. 14. Source: 401kspecialistmag.com, September 2023
Workers With Employer-Sponsored Retirement Plans Save $624K MoreAmerican workers earning less than the national average are not saving for retirement due to a lack of access, rather than not wanting to, new research emphasizes. Studies from BlackRock and Human Interest underline the significance behind employer-sponsored benefits that include both retirement and emergency savings. Source: 401kspecialistmag.com, September 2023
How Financial Factors Outside of a 401k Plan Can Impact Retirement ReadinessWhat happens to households with spending "spikes" that lack the income and cash reserves to support spending volatility? This Issue Brief provides a unique analysis of 401k plan participants' finances by linking 401k plan data with consumer banking data to better understand how 401k participants behave when faced with irregular expenses. Changes in credit card utilization, 401k plan contributions, and/or 401k plan loan use were examined after these participants experienced a significant spending spike. Source: Ebri.org, September 2023
Lack of Access Is a Crucial Factor to Preventing Retirement SavingsBlackRock and Human Interest have found that a primary reason lower-income workers are not saving for the future is because they do not have access to intuitive and automated savings tools, not because they do not want to or cannot afford to. Source: Blackrock.com, September 2023
Why Almost Half the "Sandwich Generation" is Delaying RetirementAlmost half (47%) of respondents from what is known as the "Sandwich Generation" indicated that they are delaying their retirement plans to provide financial assistance to their elderly extended family members or grown-up children, with a similar 46% using their retirement savings to cover these costs, according to a new survey from Athene. Source: Planadviser.com, September 2023
Boosting Retirement Confidence: The Role of Building Resilience in Defined Contribution PlansPeople are worried about retirement. We're facing a period of uncertainty marked by higher volatility, inflation, recessionary fears, and an aging population increasingly concerned with outliving their savings. So how do we increase retirement confidence? Building resilience into defined contribution plans is an important place to start. The new market regime presents a unique opportunity to take a fresh look at plan design, embracing greater nimbleness, and evolving investment strategies to meet the changing needs of DC participants. Source: Georgetown.edu, August 2023
Survey Finds Longevity Literacy Tied to Regular Retirement Planning, SavingNearly three-quarters (72 percent) of U.S. employees with strong longevity literacy are saving for retirement regularly, compared to 58 percent with weak longevity literacy, according to a new survey by the Teachers Insurance and Annuity Association of America Institute and the Global Financial Literacy Excellence Center. Source: Benefitscanada.com, August 2023
The Myriad Stories Behind Hispanic Retirement SavingU.S. workers' enthusiasm for saving money for retirement is lukewarm. But that doesn't go very far in explaining why only three out of every 10 Latino workers are participating in an employer retirement plan, typically a 401k. Source: Bc.edu, August 2023
Retirement Savings Patterns Across Multiple IndustriesWhile Americans save trillions of dollars a year for retirement, not everyone can retire comfortably, and often because of a lack of access. A Guideline report analyzes numerous industries to see how they differ in retirement planning access and participation. Source: 401kspecialistmag.com, August 2023
Plan Adviser Industry Needs to Adapt to Get Younger, More DiverseThe retirement plan advisement industry needs to modernize its approach to recruiting, communicating, and even its salary structure to cultivate the next generation of advisers. A panel of top advisers discusses how to shake up the typical hiring channels and even how the industry is talked about. Source: Planadviser.com, August 2023
How Advisers Can Help Close Longevity Literacy GapSimply telling someone the life expectancy at age 60 or 65 or 70 will likely not help them. The statement could even be misinterpreted in a counterproductive way. Additional information on appropriate interpretation and practical implications is needed. Source: Planadviser.com, August 2023
As 401k Hardship Withdrawals Spike, Employers Weigh Emergency Savings BenefitsPlan sponsors are weighing a new option to offer workers, in-plan emergency savings accounts. With the Secure 2.0 Act, Congress made non-highly compensated employees eligible for such benefits in plan years beginning after Dec. 31, 2023. Withdrawals from the accounts will have fewer restrictions than those from 401ks. The shift comes after workers made it clear they want additional financial support from employers, support that goes beyond a raise. Source: Hrdive.com, August 2023
Single Retirees of Color Face Greatest Financial HardshipFar larger shares of the nation's Latino, Black, Asian, and Native American retirees are financially insecure than Whites, according to a new report confirming the now-familiar racial disparities that face both workers and retirees in this country. But what also stands out in this report is the gaping disparity between retired single people and married couples. Source: Bc.edu, August 2023
Gen Z 401k Balances Spike in Past Year, Fidelity Data ShowsFidelity Q2 analysis reveals average retirement account balances for 401ks, 403bs, and IRAs all increased by double digits, and "401k millionaire" ranks swell, thanks to steady contributions and positive market conditions. Source: 401kspecialistmag.com, August 2023
Report Finds Average 401k Balances Up Nearly 10% in 2023; More Participants Taking Hardship WithdrawalsBank of America released its Q2 2023 Participant Pulse, which found average 401k balances increased by $7,250 (9.6%) since the end of 2022. The report also found that a growing number of 401k participants are initiating withdrawals from their plans. The number of participants taking hardship distributions increased 36% year-over-year, following increases in Q11 this year. In addition, the percentage of participants borrowing from their workplace plan in Q2 also increased (2.5%, up from 1.9% in Q1). Source: Prnewswire.com, August 2023
How to Best Protect Workers' Retirement SavingsThe two most significant sources of leakage identified by the non-partisan Employee Benefits Research Institute are cash-outs and loan defaults when workers leave their jobs. Plan sponsors can utilize 401k loan insurance to maximize the power of automatic portability and protect workers' savings, according to Faegre Drinker Biddle & Reath's Campbell. Source: Planadviser.com, August 2023
Most ERISA Excessive Fee Cases Surviving Motions to DismissIf you thought a heightened pleading standard in ERISA breach of fiduciary duty claims based on the fees or performance of funds in 401k and 403b plans was helping plan sponsors beat back these lawsuits, think again. Mid-year analysis from Euclid Fiduciary finds plan sponsors only winning about 30% of dismissal motions, fewer than in 2022. Source: 401kspecialistmag.com, August 2023
401k Balances Up in 2023, but So Are Hardship Withdrawals, LoansBank of America's "Participant Pulse" survey reveals average plan balances have increased nearly 10% this year, but hardship distributions and loans are also on the rise. The data tells two stories: one of balance growth, optimism from younger employees, and maintaining contributions, contrasted with a trend of increased plan withdrawals. Source: 401kspecialistmag.com, August 2023
73% of 401k Savers Would Like Personalized Investment AdviceAbout three-quarters (73%) of 401k savers would like personalized investment advice for managing their workplace savings, according to an annual 401k participant survey by The Charles Schwab Corp. Among the 1,000 employed 401k plan participants surveyed by Schwab, nearly half (49%) said they were very confident in investment decisions with professional help, with a lower 27% expressing confidence in their decision-making. About 39% of workers said they are already receiving professional advice through their plans at work. Source: Planadviser.com, August 2023
Experts Forecast More Retirement Plan Options for Gig WorkersA panel of employment industry executives and researchers see at least some potential for gig workers to be offered workplace retirement plans, according to polling released Wednesday by TransAmerica Corp. The majority of a Transamerica-sponsored panel sees better retirement plan offers and even matching for gig workers by 2026. Source: Planadviser.com, August 2023
One in Five Fear Never Being Able to RetireOne in five Americans believe they will never be able to retire, according to new Axios/Ipsos polling on retirement. Not surprisingly, financial worries are the main reason for this. Among the 20% who don't think they'll ever retire, a decisive majority (70%) say it's because they can't or won't be able to afford to retire, while only 19% of people said they just don't want to retire. Source: 401kspecialistmag.com, July 2023
A Third of Workplace Savers Plan to Delay RetirementNew research from BlackRock shows that burnout doesn't only extend to the workplace. The BlackRock Read on Retirement survey finds that more individuals are experiencing "financial burnout," as 30% plan to delay retirement while 56% feel "on track," a 12% dip compared to 2021 and a 7% drop from last year. Source: 401kspecialistmag.com, July 2023
The Uneasy State of U.S. Retirement Saving TodayThis was 2022 in a nutshell: more people are saving for retirement but they're not saving nearly enough. Every year, Vanguard releases its report on the state of the nation's habits around saving for retirement. Participation among workers with access to 401k plans has jumped over the past five years from 72 percent to 83 percent in 2022, according to the newest report on the 401k plans in Vanguard's large client base. Some credit goes to the growing popularity among employers of automatically enrolling workers in their plans. Source: Bc.edu, July 2023
Report Shows 401k Funds Funnel Billions to Nuclear, Other Controversial WeaponsA new analysis found the top 25 U.S. fund managers all earn a "D" grade or worse, with significant investments in arms manufacturers and major military contractors, including companies involved with nuclear weapons and controversial weapons like cluster munitions, anti-personnel landmines, incendiary weapons, and depleted uranium. Source: 401kspecialistmag.com, July 2023
More Americans Interested in Adding Annuities to Employer Retirement PlansA growing number of Americans are interested in adding an annuity to their employer-sponsored retirement plan like a 401k, according to a new study from Allianz Life Insurance Company of North America. Allianz Life's study finds interest has grown significantly as most Americans worry they will run out of money from their employer-sponsored plan during retirement. Source: Allianzlife.com July 2023
Saving for College Hurts Retirement for Nearly 60%, Survey SaysAmong people aged 25 to 80 who are saving for both of those causes, 58% say they are delaying retirement "significantly or moderately due to these dual financial goals," according to results of a survey published Wednesday by the Society of Actuaries. And it's not just that people are putting less into their 401ks and individual retirement accounts IRAs, 41% of the 1,000 respondents said they've taken early withdrawals from those accounts to help pay for college for relatives. Source: Investmentnews.com, July 2023
Employees More Likely to Stay if Offered a Retirement PlanAccording to a new study, 71% of employed Americans say they're more likely to stay with their current employer if they're offered an employer-sponsored retirement savings plan. The number, from Voya Financial's second-quarter retirement report, is up significantly from October 2022, when just 60% of employees said the same. Source: 401kspecialistmag.com, July 2023
Gen X, the First 401k Generation, Is Least Prepared for RetirementGen Xers entered the workforce as pensions were fading and 401k plans were "primitive." Now they are closest to retirement but feel least ready for it, according to Transamerica research. Source: Planadviser.com, July 2023
BofA Data Finds Men's Average 401k Account Balance Exceeds Women's by 50%Bank of America data reveals that the average 401k account balance among men is 50% greater than women's overall ($89,000 vs. $59,000). However, this gender imbalance is closing among younger generations. Baby Boomer (ages 58-76) and Gen X (ages 43-57) men have significantly greater account balances than women in their generations (87% vs. 53%, respectively). Source: Prnewswire.com, July 2023
DC Savings and Investing Collectively Dropped in 2022While 2022 was marked with periods of economic volatility and financial uncertainty, the latest research from Alight Solutions argues that the state of the market wasn't as bad as it appeared then. Source: 401kspecialistmag.com, June 2023
Using Technology to Improve Plan Sponsor, Participant ExperiencesAdvances in technology have made many areas of life easier, and this is true for retirement plan sponsors and participants as well. The increasing use of data has facilitated better plan design decisions and increased personalization of participant advice. Source: Plansponsor.com, June 2023
One-Quarter of Pre-Retirees Expect to Delay Retirement, According to NationwideOne-quarter of pre-retirees, defined as non-retired investors aged 55 to 65, are planning to retire later than they had expected, and another 15% are unsure if they will ever retire, according to Nationwide's eighth annual Advisor Authority survey from the Nationwide Retirement Institute. Source: Planadviser.com, June 2023
Retirement Saving at New High Thanks to Automatic EnrollmentAutomatic enrollment in 401k plans is helping Americans save for retirement in record numbers. According to a Vanguard survey, participation rates in 401k plans for which the asset management firm serves as recordkeeper have reached an all-time high of 83%. Vanguard's report also revealed that employers are increasingly bolstering retirement plans with personalized financial services such as advice. Source: Investmentnews.com, June 2023
Forgotten 401k Accounts Hit $1.65 Trillion in AssetsForgotten 401k accounts are growing by the year. Capitalize found forgotten accounts have grown by 20% in the last two years. As of May 2023, there are an estimated 29.2 million forgotten or left-behind 401k accounts in the U.S., representing $1.65 trillion in assets. Source: 401kspecialistmag.com, June 2023
Robust Retirement Tiers Can Help Keep Participants In-PlanResearch released by Cerulli Associates last month showed that more than half of plan sponsors (54%) would prefer to keep their retired participants’ assets in their plan, rather than see them rolled into an individual retirement account or other plan. That’s more than double the 26% who said the same in 2019. But plan sponsors will need to do some work to succeed in that goal. Source: Plansponsor.com, June 2023
Top Retirement Plan Advisers Weigh In on Potential, Pitfalls of SECURE 2.0PLANADVISER's top retirement adviser pulse survey finds optimism about the legislation, alongside a healthy dose of questions and advice for policymakers. Source: Planadviser.com, June 2023
Prudential Research Finds Gen X Particularly Unprepared for RetirementNew research findings reiterate concerns that American adults -- often in their peak earning years -- are not saving enough for retirement and that retirement plan advisement could be helpful at the plan sponsor and participant level. Source: Planadviser.com, June 2023
Emergency Savings and Retirement Planning Tightly LinkedA new report from the BlackRock Emergency Savings Initiative emphasizes a finding many in the retirement space have been pushing, that emergency savings and retirement readiness are inextricably connected. Source: 401kspecialistmag.com, June 2023
Young Employees Pulling Back on Retirement ContributionsMorgan Stanley at Work study reveals retirement saving erosion, as retirement head Bunnell notes the 'central role' of retirement plan advisers in times of volatility. Source: Planadviser.com, June 2023
Small Business Retirement Plan Options - 2023This chart compares the four common types of plan designs often utilized by small employers. Source: Consultrms.com, June 2023
How Well Do People Perceive Their Retirement Preparedness?This article examines whether households have a good sense of their retirement preparedness, do their expectations match the reality they face? Understanding households' self-assessed retirement preparedness is important because misperceptions can distort saving behaviors. Households that are not worried enough about their retirement income may not save enough even if they have the opportunity; households that are too worried may unnecessarily sacrifice their pre-retirement standard of living. Source: Bc.edu, June 2023
Employer Contributions Reach Record-High Levels: FidelityWith U.S. employers adding one million jobs to the economy in the first quarter of 2023, Americans appear to be refocusing on investing in their future, according to Fidelity's latest retirement trends analysis. Source: Asppa.org, June 2023
Retirement Account Balances Increase Across the BoardDespite a challenging market and high day-to-day costs, new research from Fidelity Investments finds account balances are up in 2023. Their latest findings show 401k account balances increased 4%, while IRA and 403b balances grew 5% and 6%, respectively. Source: 401kspecialistmag.com, May 2023
Managed Accounts See Higher Adoption: VanguardManaged account usage has come a long way. While target-date funds have worked as a reliable investment option, usage of managed accounts has grown steadily over the past number of years. Recent Vanguard research found that 66% of its participants in defined contribution plans had a professionally managed allocation at year-end 2022, up from 40% at year-end 2013. Source: 401kspecialistmag.com, May 2023
401k Participant Pulse: Tracking the Confidence of Plan ParticipantsPlan participants may access or make changes to their retirement accounts in response to several factors, including the state of the market and the economy. These key metrics, in part, signal participant confidence and sentiment. Notably, in early 2023, fewer participants took loans, but for higher amounts, while hardships increased in number and amount. At the same time, participants started the year with lower balances but higher contributions than last year. On a positive note, more participants are increasing their plan contribution rates than decreasing their rates, across all generations. Source: Bofa.com, May 2023
2 in 3 Small Businesses Still Don't Offer Retirement Plans: FidelityThe private retirement plan industry knows it has a coverage gap that needs to be addressed, and further evidence that the gap exists is out today with findings from the first-ever "Small Business Retirement Index" from Fidelity Investments. Source: 401kspecialistmag.com, May 2023
Workers' Retirement Confidence Takes a Big HitA new report finds a decline in retirement confidence to levels not seen since the 2008 financial crisis. The report, from the Employee Benefit Research Institute, also finds both workers and retirees are very concerned about inflation and its impact on their savings and spending. Source: Napa-net.org, April 2023
Report Reveals Increase in Number of Workers Delaying RetirementEmployers are being challenged to help their employees who are feeling strained because of their finances, as more workers expect to delay retirement, new information from John Hancock shows. Source: Plansponsor.com, April 2023
Study Shows ERISA 403b Plan Sponsors Design Plans to Promote Retirement SavingThe report found that the wide array of nonprofits that sponsor 403b plans design their plans to engage participants and promote retirement savings. Many large 403b plans subject to ERISA automatically enrolled employees into the plan. Four-fifths of large ERISA 403b plans had employer contributions and three-quarters of large ERISA 403b plan participants were in plans that offered employer contributions in 2019. And a majority of large ERISA 403b plans offered the flexibility of plan loans. Source: Ici.org, April 2023
Automatic Enrollment Adoption Grew to 85% in 2022: T. Rowe PriceAutomatic solutions adoption continued to rise in 2022, finds a new report by T. Rowe Price. The firm's annual Reference Point, a benchmarking report analyzing data on 401k plan design and participant behavior, found that plan adoption of automatic enrollment rose to 85% in 2022. Source: 401kspecialistmag.com, April 2023
Increased Cashouts at Job Separation Highlight Need for Auto-PortabilityWhen switching or leaving jobs, many employees are cashing out their 401k savings, despite warnings from financial professionals against incurring the accompanying 10% penalty, according to research recently published in Marketing Science and Harvard Business Journal. Source: Plansponsor.com, April 2023
A (Really) Surprising Reason for High Retirement Plan LeakageThe United States has the most liquid retirement savings system among developed countries, and participants take full advantage, a problem for long-term saving and accumulation, which is the system's intended effect. Surprisingly, researchers found that behavioral rather than economic factors account for high withdrawal rates at job separation, and the employer match might be to blame. Source: Napa-net.org, April 2023 | |||||||
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