Employers Grade Employee Savings Habits Lower Than Plan Design
More than three-fourths of retirement plan sponsors surveyed give their plans a grade of A or B, but only 61% give their employees’ saving habits similar grades.
A
survey from the LIMRA Secure Retirement Institute shows one-third of plan
sponsors give their retirement plans an A, and 46% give their plans a B.
However, only one-quarter give an A grade to employees’ retirement savings
habits, and 36% give employees’ savings habits a B.
Nearly
three out of ten (29%) plan sponsors said employees’ savings habits deserve
a C grade, 8% give them a D and 1% an F. Seventeen percent of respondents give
a C grade to their own retirement plans, 3% a D and 1% an F.
According
to the survey, three-quarters of plan sponsors say helping their employees save
enough for retirement is one of the three most important factors in their
retirement benefit strategy—nearly four in 10 say it is the top factor.
“These
findings suggest that while employers want to help their employees save for
retirement, they do not feel their actions or plan design is responsible for
their employees’ retirement savings habits,” says Kathleen Rook, assistant
research director, LIMRA Secure Retirement Institute. “Research shows that
tools like auto-enrollment and auto-escalation can have a measurable impact on
employee participation and savings rates, yet only a third of plan sponsors
offer these features in their plans. These findings indicate opportunities for
plan providers and advisers to help employers manage costs and leverage tools
to help employee savings habits.”
The LIMRA Secure
Retirement Institute surveyed more than 1,500 plan sponsors in late 2013 and
early 2014.
Mutual Funds Prominent Investment Vehicle for Retirement Savers
Members of the Baby Boom Generation and Generation X had the highest rates of mutual fund ownership in mid-2014, according to a survey by the Investment Company Institute (ICI).
The
annual survey found three times as many U.S. households owned mutual funds
through tax-deferred accounts as owned mutual funds outside such accounts. Among
mutual fund–owning households, 43% invested in mutual funds solely inside
employer-sponsored retirement plans, which include defined contribution (DC) plans
and employer-sponsored individual retirement accounts (IRAs).
Eighteen
percent owned funds solely outside these plans, and 39% had funds both inside
and outside employer-sponsored retirement plans. Altogether, 82% of mutual
fund–owning households owned funds through employer-sponsored retirement plans,
and 57% owned funds outside of these plans. Among households owning mutual
funds outside of employer-sponsored retirement plans, 80% owned funds purchased
from an investment professional.
Almost
all mutual fund investors were focused on retirement saving. Saving for retirement
was one of the financial goals for 91% of mutual fund–owning households, and nearly
three-quarters (74%) indicated retirement saving was the household’s primary
financial goal.
Mutual
fund–owning households often purchase their first mutual fund through
employer-sponsored retirement plans. In mid-2014, across all mutual fund–owning
households, 64% had purchased their first fund through that channel.
The
survey found mutual fund–owning households often held several funds, and equity
funds were the most commonly owned type of mutual fund. Among households owning
mutual funds in mid-2014, 83% held more than one fund, and 86% owned equity
funds.
Of the many factors
that shape shareholders’ opinions of the fund industry, performance of fund
investments continues to be the most influential. Two-thirds of mutual fund
shareholders indicated that fund performance was a “very” important factor
influencing their views of the industry, and more than four in 10 cited fund
performance as the most important factor.
The
studies also report that in mid-2014, 32% of households headed by an adult
Millennial (born 1981 to 1996), and 31% of Silent and GI Generation households
(born 1904 to 1945) owned mutual funds. Among all U.S. households, an estimated
53.2 million households, or 43.3%, owned mutual funds in mid-2014. ICI
estimates that more than 90 million individual investors owned mutual funds.
Members
of the Baby Boomer generation were the largest share of mutual fund–owning
households in mid-2014, representing 42% of all mutual fund–owning households.
Baby Boomer households also held the largest share of households’ mutual fund
assets at that time, with 51% of the total.
Most
U.S. mutual fund shareholders had moderate household incomes and were in their
peak earning and saving years. More than half of U.S. households owning mutual
funds had incomes between $25,000 and $99,999, and nearly two-thirds were
headed by individuals between the ages of 35 and 64.
Forty-nine
percent listed saving for an emergency as a goal, and 23% reported saving for
education among their goals. Nearly half of mutual fund–owning households
reported that reducing their taxable income was one of their goals.
For the survey, interviews
were conducted among 6,003 households over the telephone with the member of the
household age 18 or older who was the sole or co-decisionmaker most
knowledgeable about the household’s savings and investments.