Majority of Plan Participants Lost on Retirement Planning, Seek Direction From Employers
BOSTON, MA, January 25, 2012 -- A survey released today by State Street Global Advisors (SSgA), the asset management business of State Street Corporation, suggests that employees around the country are in need of direct, simple guidance to help them reach their retirement goals. The SSgA Defined Contribution (DC) Investor survey was created to reveal employees' investing behaviors and interactions with their retirement plans. Conducted jointly with the Boston Research Group, the survey included over 1,000 401k, 403(b), profit sharing and stock purchase plan participants.
The findings from the survey emphasize four areas of focus for employers and their participants: attitudes toward saving for retirement, awareness of automatic features in DC plans, awareness of long-term investment risks and nuances among age groups that impact likeliness to save.
"Plan participants communicated loud and clear about what they need: simple steps and automated features," said Kristi Mitchem, senior managing director and head of Global Defined Contribution for SSgA. "One of the most surprising and encouraging findings is the willingness of participants to take 401k direction from their employers. The ongoing volatility in the financial markets has increased anxiety amongst plan participants and a significant percentage want simplified and prescriptive guidance in order to make progress toward their retirement goals."
Attitudes towards saving are changing, with 75 percent of survey respondents indicating they would be willing to be automatically enrolled in a 10 percent savings "boot camp" for six months. The survey concluded that 54 percent of participants say they are "very" or "somewhat confident" that their savings are on track to fund their planned retirement lifestyle. Other participants have a much less optimistic outlook. Most place the blame on themselves, with 55 percent indicating they lack confidence because their rate of savings is not high enough and 52 percent indicating they did not start saving early enough. Others blame the economy or the financial markets, and only a few blame their employer.
"For the first time, DC assets will outnumber traditional defined benefit assets globally in 2012, with DC assets increasing to 52 percent of all retirement assets," continued Mitchem. "This statistic underscores the importance of improving interactions between DC plan sponsors and plan participants by better understanding the needs and savings behaviors of DC investors. Plan participants typically do not take action for two reasons: lack of knowledge or lack of time. As we design plans and engage employees, the more we know about them, the bolder we can be with solutions that will help them achieve retirement security. We have embedded the survey results into a bi-annual magazine called ‘The Participant' to communicate these insights. The magazine is designed to help plan sponsors deliver solutions that combat barriers to retirement readiness and make a difference by understanding employee needs and providing simple steps and tools that plan participants can use to increase savings and address investment risks, like inflation and company stock."
Automatic features offered by employers to encourage participants to save, such as auto-enrollment and auto-escalation, are preferable but not well understood, with 74 percent of respondents indicating that "making me automatically do something like save more or invest in a professionally managed fund" would improve their retirement readiness. Awareness of long-term investment risks is limited, such as the risk associated with inflation and ownership of company stock. Forty-three percent of respondents that are aware of the US inflation rate have considered its effects on their retirement, but do not know what to do about it. Sixty-eight percent responded favorably to a plan solution that not only limits the risk of a significant loss in their company stock holdings, but also puts a small limit on the upside.
The impact of the financial crisis and the generational differences in attitudes also impact retirement strategies. Seventy-three percent of the youngest workers, ages 18-24, said the recent volatility prompted them to save more, versus 37 percent of the general population. Younger savers are more conservative and more likely to save than their older counterparts.
"The market volatility has created a new generation of savers," Mitchem said. "Younger workers are saving more and spending less than their parents, while 66 percent of those over 50 years of age admit to not saving at an early enough age."
For more information, or to subscribe to "The Participant" magazine, visit: www.ssga.com/dc/theparticipant.
About State Street Global Advisors
State Street Global Advisors (SSgA) is a global leader in asset management. The firm is relied upon by sophisticated investors worldwide for its disciplined investment process, powerful global investment platform and access to every major asset class, capitalization range and style. SSgA is the asset management business of State Street, one of the world's leading providers of financial services to institutional investors.
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