Participants February 1, 2017

Gen Xers, Baby Boomers Feel Need to Save More for Retirement

Among those who report having little in retirement savings, 59% say they don’t have enough or make enough money to save, while nearly one-quarter (24%) indicate they plan to rely on Social Security.
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More than three-quarters of Generation X and Baby Boomers strongly agree (38%) or somewhat agree (39%) that they need to save more to afford the retirement they want.

An Ipsos/USA Today poll of 1,205 adults ages 45 to 65 from the continental U.S., Alaska and Hawaii, found 68% have personal savings for retirement, 40% invest in stocks, 39% have a pension, 19% have annuities, 19% have bonds, and 13% hold securities. More than half (52%) of respondents said they contribute to a 401(k) plan, while 42% contribute to an individual retirement account (IRA), 14% contribute to a health savings account (HSA), and 10% contribute to a 403(b).

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When asked how they intend to fund their retirement, 12% said they will almost entirely rely on Social Security, and 30% said they will mostly rely on Social Security. Forty-two percent said they will mostly rely on their own savings or benefits, and 17% said they will almost entirely rely on their own savings and benefits.

The majority of respondents expect to retire at age 70 or before; 17% at 60 or under, 26% at ages 61 to 65 and 22% at ages 66 to 70. Only 7% said they do not plan to retire. Only 17% feel very prepared for retirement, while 42% feel somewhat prepared. Nineteen percent feel somewhat unprepared, and 22% feel very unprepared.

Similarly, only 15% feel very confident they will have enough money to last through retirement, and 40% feel somewhat confident. Twenty-three percent feel not very confident, and 22% feel not confident at all. Seventy-eight percent strongly or somewhat agree that they will cut back on spending in retirement. Seventy-two percent somewhat or strongly disagree that their families will help support their retirement.

NEXT: How much have they saved?

Sixty-five percent are very or somewhat likely to put at least $100 toward retirement over the next six months, but 77% said they are very or somewhat likely to put at least $100 toward paying off debt.

Seven percent of Gen Xers or Baby Boomers reported they have less than $10,000 saved for retirement, and 11% have $10,000 to $49,999. Fourteen percent have $50,000 to $99,999, and 19% have $100,000 to $249,999. Twenty-three percent have $250,000 to $999,999, and only 7% have saved $1 million or more.

Among those who reported they had little in retirement savings, 59% said they don’t have or make enough money to save, while nearly one-quarter (24%) indicated they plan to rely on Social Security, and 19% said they have a pension. Eight percent said it is just not a priority right now, and 6% said they lack information regarding retirement.

Twenty-three percent reported that they use a financial adviser or broker to help plan their investments, savings or retirement, while 21% rely on the Internet and 20% use advice from family, friends or co-workers. Eighteen percent use a financial planner, and 11% turn to newspapers or magazines.

More findings from the study are here.

Products February 1, 2017

Empower Launches QDIA That Matures as Participants Do

DC plan participants are first put into a TDF, then upon certain triggers, moved to a managed account.
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Empower Retirement announced the launch of a new qualified default investment alternative (QDIA) for retirement plans that is “designed to help plan participants whose retirement planning needs change over time.”

According to Empower, the Dynamic Retirement Manager solution takes into account the driving roles of participant inertia and engagement—which can change significantly over time. Given this fact, the solution allows plan sponsors to direct their employees’ retirement deferrals first into target-date funds (TDFs) during the early portion of their working years. Later on, when a pre-determined set of criteria are triggered, the participant’s assets will automatically shift into a managed account.

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Empower says the later-career transition to a managed account affords participants who have had success in the plan an opportunity to receive advice on a personalized retirement income strategy once they are ready for it. Of course, given the challenge in general of getting young people focused on retirement savings, it stands to reason the solution will be most effective when paired with such progressive plan design features as auto-enrollment and auto-deferral escalations.

“In an ideal world everyone in their first job would make all the correct and necessary decisions about investing for the future and would continue to do so throughout their careers,” observes Edmund Murphy III, president of Empower Retirement. “The reality is that retirement isn’t top-of-mind for many workers until later in life and by then their needs and goals are more acute and likely in need of customization.”

Thus it makes sense to blend TDFs and managed accounts within a QDIA solution, he says.

NEXT: Industry comments on the release 

As the firm explains, triggering criteria for the shift to managed accounts within Dynamic Retirement Manager are designated by the plan sponsor. Criteria can include such factors as age, years of service, or years to retirement. Dynamic Retirement Manager’s participant interface is “centered on a multi-stage, multi-touch engagement model designed to capture a participant’s interest in their retirement plan at a point when they are ideally more receptive to saving for retirement …  In the event that a participant remains unengaged even after the shift to a managed account, the Empower recordkeeping system contains sufficient personalized data to make automatic investments on their behalf, unless the worker chooses to opt out.”

In rolling out its new product, Empower is highlighting various industry voices who have called for more progressive thinking about the role of the QDIA. David Blanchett, head of retirement research at Morningstar Investment Management, comments that “the time is right for the industry to develop innovative QDIA approaches that can address the modern realities of retirement investing. Leading providers have the tools, the data and the accumulated knowledge to deploy a significantly better experience.”

Lew Minsky, president and CEO of the Defined Contribution Institutional Investment Association, agrees: “There’s no question that there is a great demand to help participants who need advice tailored to their specific goals. The challenge for plan sponsors and advisers is how and when to engage at the right time and right place … Ten years of experience tells us that a fresh approach to this problem should be widely considered.”

For more information, visit www.Empower-retirement.com. 

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