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Plan Participants Still Not Confident in Their Approach to Investing

    

NEW YORK, NY, July 25, 2016 -- J.P. Morgan Asset Management today released proprietary findings from its fourth research study of plan participants. The resulting white paper, "Guiding Participants from Intent to Action: 2016 Defined Contribution Plan Participant Survey Findings," reveals: Many participants are still not confident in their approach to saving and investing; there appears to be a human disconnect between participant intent and action; and, a potential misperception about participant support for automatic features and strategies may be holding plan sponsors back from strengthening their defined contribution (DC) plans.

In addition to looking at results for participants as a whole, the paper examines similarities and differences across investor types -- "do it for me" and "do it yourself" investors; and includes high-level findings for two age cohorts -- those under 30 years of age and those 30 years of age and older. It also explores key steps plan sponsors can take to help proactively place participants on a path to financially secure retirement.

The survey of 1,001 DC plan participants found most are still uncertain that a financially secure retirement awaits them because: more immediate financial demands interfere with their ability to save for the future; many don't have a clear understanding of how to set a retirement savings goal; and most are not confident in their ability to make investment decisions. Plan sponsors, for their part, can and have provided education and tools to help participants size their retirement need, set realistic savings goals and improve their knowledge of investing. However, survey results suggest that focusing on closing the knowledge gap is not enough. When it comes to saving and investing for retirement, another gap exists, a disconnect between participant intent and action. Key findings include:

  • Many participants know they are not saving enough (68% say their 2015 contributions were below where they should have been).
  • Most participants (81%) say they are interested in doing financial planning for retirement, but almost half (45%) do not have a plan.
  • Nearly half of participants (48%) admit they simply do not spend enough time thinking about and planning for retirement.
  • Many participants may not be fully engaged in managing their 401k accounts. For example, 28% have never rebalanced their 401k account, 31% have never made a change to their initial choice of investment options, and 18% have never increased their contribution amount.

"Since 2007, our surveys have tracked the knowledge, behavior and attitudes of 401k participants. While some progress has been made, many DC plan participants still face significant barriers to reaching retirement goals. We think plan sponsors have an opportunity to strengthen their plans and help provide the necessary catalysts for transforming intent to action," said Catherine Peterson, Managing Director and Global Head of Insights Programs, J.P. Morgan Asset Management. "We strongly believe that the most effective way for plan sponsors to help put employees on the path to a more secure retirement is to proactively place them on that path. This can be done through the use of automatic features and strategies such as automatic enrollment, automatic contribution escalation and re-enrollment, in conjunction with a qualified default investment alternatives (QDIA), such as a target-date fund. We urge all plan sponsors to work with their industry partners to consider these features and strategies to help strengthen their DC plans."

Based on our research findings, most participants appear to support plan features and strategies, designed to offer a disciplined approach to saving, simplified investment choices, and improved asset allocation. Key findings include:

  • Roughly three-quarters of participants are in favor of or at least neutral toward automatic enrollment (75%) and automatic contribution escalation (74%).
  • Roughly two-thirds (67%) are in favor of or at least neutral toward a combination of these two features.
  • A large majority (90%) find target-date funds appealing.
  • Most (82%) are in favor of or at least neutral toward re-enrollment.

The analysis also shows that participant experience with these features and strategies is very encouraging:

  • Among those automatically enrolled in their plans, only 1% opted out, nearly all are satisfied (96%), and almost a third (31%) say they would not have enrolled otherwise.
  • Among those whose contribution amounts are/were automatically increased by 1% to 2% each year, almost all are satisfied (97%), and 15% say they were unlikely to have escalated their contributions if not for this automatic feature.
  • Among those who went through a re-enrollment, 73% allowed their assets to be moved to a target-date fund, and 99% of those whose funds were moved are satisfied.

"Strengthening DC plans will require plan sponsors to carefully consider these features and strategies and establish the appropriate balance between maximizing participant autonomy and proactively placing participants on a path to a financially secure retirement," continued Ms. Peterson. "With the skillful collaboration of all involved, receptivity to practical new developments in plan design features and investment strategies, and awareness of participants' needs and wants, we believe the fortification of DC plans will continue to advance at a steady pace. Working together, we can help to ensure that more members of the U.S. workforce experience a financially secure retirement."

To learn more about J.P. Morgan Asset Management's leading DC investment strategies, product innovations, resources and Retirement Insights program for advisors and plan sponsors, please click here, or to view the full paper "Guiding Participants from Intent to Action: 2016 Defined Contribution Plan Participant Survey Findings" go to https://am.jpmorgan.com/us/en/asset-management/gim/adv/insights/plan-participant-survey-findings.

Methodology

From January 12 through January 25, 2016, J.P. Morgan Asset Management partnered with Mathew Greenwald & Associates, a market research firm based in Washington, D.C., to conduct an online survey of 1,001 defined contribution plan participants.

In order to qualify for the study, each respondent had to be employed full-time at a for-profit organization with at least 50 employees, be at least 18 years old and have contributed to a 401k in the past 12 months.

Survey results have been weighted by age, gender and education to reflect the overall makeup of the general population of 401k plan participants. In a similarly sized, random sample survey of general population respondents, the margin of error (at the 95% confidence level) for the total population in this study would be plus or minus approximately 3.2 percentage points.

About J.P. Morgan Asset Management

J.P. Morgan Asset Management, with assets under management of $1.7 trillion, is a global leader in investment management. J.P. Morgan Asset Management's clients include institutions, retail investors and high net worth individuals in every major market throughout the world. J.P. Morgan Asset Management offers global investment management in equities, fixed income, real estate, hedge funds, private equity and liquidity. JPMorgan Chase & Co. (NYSE: JPM), the parent company of J.P. Morgan Asset Management, is a leading global asset management firm with assets of approximately $2.5 trillion and operations worldwide. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.

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