A Disconnect on Retirement Readiness

More than half of retirement plan sponsors (59%) say the majority of their participants are saving enough to retire with the income they will need, according to BlackRock’s DC Pulse Survey. But only 28% of the participants surveyed are confident they are saving enough.

When it comes to the information plan participants need, nearly two-thirds of plan sponsors (64%) describe their participants as “very” or “extremely” informed about how much money they should be saving today for retirement, but only 37% of employees describe themselves the same way.

Another big divide appears on the topic of retirement income, with 58% of plan sponsors saying their workers are either “very” or “extremely” informed about how to generate income from their retirement savings. Just under one-third of employees (31%) say they are.

Despite this apparent disconnect, plan sponsors appear well aware of the challenges participants face. Nearly half of plan sponsors (49%) agree with the statement, “My organization is facing an impending ‘retirement crisis’ where participants will keep working because they are unable to afford to retire.”

“Employers generally recognize that employees are under-prepared for retirement, but in some ways the problem runs far deeper than they realize,” says Anne Ackerley, head of BlackRock’s US and Canada defined contribution group.

Workers—particularly younger ones—want more support for retirement planning. Slightly more than half of workers (55%) say that their employer should provide more help. The younger the cohort, the louder the call for help: 63% of Millennials think their employer should be doing more to help them prepare for retirement, versus just 47% of Baby Boomers.

Better retirement income solutions are one area where plan sponsors might provide more help, according to the survey. Although just 38% of workers have heard of products that give a consistent stream of income in retirement, 88% said they would be interested in considering such a product (40% would be “very” or “extremely” interested). Among plan sponsors, 69% agree that there is a growing need for DC plans to provide retirement income solutions and services—however, just 51% say they currently do so.

At the same time, 65% of plan sponsors agree that participants would value more company help, and many are taking steps to make good savings practices automatic. In the past 12 months, about one in four plan sponsors have introduced auto-enrollment, auto-escalation and/or company matching into their DC plan. Plan sponsors also are focusing on their older participants: 60% say they would like to find ways to encourage participants to stay in the plan after they retire.

In general, workers in DC plans have a positive view of their retirement investing. Nearly 70% of workers chose the words “confident,” “optimistic,” “hopeful,” “certain,” or “comfortable” when describing how they feel about the investing they do through their DC plan. But nearly half don’t agree that they are “on track” to retire with the lifestyle they want.

The BlackRock DC Pulse Survey bases results on 200 large and mega DC plan sponsors and 1,003 plan participants in the U.S. fielded online by Market Strategies International, an independent research company. Plan sponsors have at least $300 million in assets, with nearly half of the respondents serving in benefits or human resources roles, and the rest in finance, investment or business management. The 1,003 plan participants are employed full-time and were participating in their employer’s 401(k), 403(b), 457 or 401(a) plan, with at least $5,000 in assets in their current account.