Data and Research March 30, 2015

Genworth Survey Highlights Retirement Shortfalls

More than half of U.S. adults responding to a recent Genworth survey have not started making financial arrangements for retirement.
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According to the recent “Generational Planning Study” released by Genworth, nearly half (46%) of American adults give themselves a poor or failing grade when it comes to their retirement account contributions.

Americans are also somewhat pessimistic about other critical topics, including long term care arrangements and the cost of other health care. According to the study, fully 53% of adults have not started making financial arrangements for retirement, and four in 10 respondents stated not having saved enough for retirement is their biggest financial regret. 

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“Preparing ourselves financially for future aging and care needs is one of the biggest issues Americans are facing today,” says Tom McInerney, president and CEO of Genworth. “Competing financial obligations, lack of information and even fear prevent many from making a plan simply because they don’t know how to approach retirement planning and take the first step.”

Of respondents who have started making retirement arrangements, the average age is 33, Genworth finds. Respondents also report average annual retirement savings of $7,360—but Genworth researchers warn the more informative median saving figure is a mere $500.

When asked about the amount of money they will need to retire, adults said they anticipated needing, on average, $1.7 million for retirement. At the current average annual savings rate, a 33-year-old would only have approximately half a million dollars at age 65, assuming a 4% compound interest rate. 

Genworth finds a major component of retirement planning that tends to be overlooked by Americans is the potential need for long term care. According to Genworth researchers, as many as seven in 10 Americans will require some form of long term care before their death.

According to Genworth, Americans can take several easy steps for their financial and families’ well-being. The survey reveals few people have created a will, designated guardians or set advanced medical directives. “These three, little-to-no-cost actions can be added to a financial checklist that spans every stage of life,” the researchers note. “It is increasingly more important to develop good habits earlier in the retirement planning process, even though life changes and aging tend to be the impetus for many to start planning for their aging and retirement needs.”

Genworth encourages plan sponsors and advisers to download the full Generational Planning Study from its website. The underlying survey research was conducted in collaboration with J&K Solutions LLC and The Olinger Group, via an online survey of 1,000 U.S. adults from across the U.S., during February 2015.

Data and Research March 30, 2015

Executive Benefit Program Usage Dipped in 2014

When deciding to enroll in a non-qualified retirement savings program, communication and education are ranked as highly important by potential plan participants.
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Companies report a slight 3% drop in plan participation rates from 2013 to 2014, according to the MullinTBG/PLANSPONSOR Executive Benefits Survey.

Survey respondents ranked quality plan education and communication as the most important feature when deciding to enroll in a non-qualified program.

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“Clear communication of plan features and education about the benefits of deferring compensation to meet financial planning goals are key drivers of plan participation and satisfaction for both participants and plan sponsors,” says James McInnes, senior vice president for total retirement solutions at Prudential Retirement.

Consistent with previous years, the survey revealed a large majority (84%) of companies offer non-qualified deferred compensation plans (NQDCP) to their highly compensated employees, putting it at the top of the list as the most common executive benefit among survey respondents. Among companies offering these plans, three-quarters rely exclusively on a third-party recordkeeper to administer the plan and rank quality of service team, willingness to be consultative in NQDCP services, and ease of online user experience as the top three factors they use to choose a recordkeeper.

“As more companies offer and improve their non-qualified programs, recordkeepers need to understand each plan sponsor’s needs and help ensure the plans are designed in a way that keeps participants engaged and increases deferral rates,” explains  Yong Lee, chief operating officer at MullinTBG. “Whether that’s by coupling these plans with financial planning benefits, which 48% of survey respondents already provide, or other offerings, companies must work with their providers to design executive benefits that will attract and retain valued employees and most importantly, help them realize successful outcomes for their financial future.”

Research shows the criteria for determining NQDCP eligibility varied among categories. For a strong majority (85%), the NQDCP is offered “to provide a vehicle for retirement savings,” up from 77.8% in 2013. The strategy of accessing informal funding to manage NQDCP asset-to-liabilities is on the rise as well, used by 62%, up from 57.2% in 2013.

Nearly three-quarters (74%) of plan sponsors rate their plan as either “effective” or “extremely effective,” with 58% that provide financial planning benefits doing so at no cost to the participant. However, McInnes explains that executive benefits will not accomplish their stated goals without the engagement of participants.

The survey includes 232 responses from plan sponsors sharing insights about their executive benefits offerings.

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