Data and Research February 5, 2024

PGIM Launches Retirement Confidence Index

The dataset provides plan sponsors with information on U.S. workers, controlled for demographic factors, and will be updated quarterly.

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PGIM officially launched the RetireWell Confidence Index today, enabling plan sponsors to access a dataset with responses from 300,000 U.S. workers who have taken an online financial wellness assessment to measure their financial and retirement confidence.

“The index is an aggregation of the responses over time, where it removes any of the effects related to things like income, [because] individuals who have higher incomes are much more confident,” says David Blanchett, the head of retirement research at PGIM DC Solutions.

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The index’s launch culminates a portion of the work on the data project Blanchett started when he joined the company in 2021.

“I started working closely with Prudential’s financial wellness team, [and] I learned they started offering an online financial wellness assessment in May 2017 that includes about 25 questions on a variety of topics related to financial and retirement confidence,” Blanchett says. The index provides “some insights into how overall retirement confidence and financial confidence have evolved over time.”

 

Evaluating Confidence Levels

The index controls for the demographic factors related to confidence, including age, income, gender and marital status, says Blanchett, who helped to conceive of and supported developing the index.

The index interprets results on a scale of six confidence levels: very high; high; above average; below average; low; and very low.

Although individual sponsors are not able to access data specific to their plans, using the data may inform “a plan sponsor [regarding] how their participants are feeling about retirement versus national averages,” Blanchett says. “This [dataset is] trying to capture things that you wouldn’t normally get from the traditional quarterly report that shows you how your participant balances have changed over time.”

The current question used to estimate financial confidence asks respondents, “Overall, how are you feeling about your finances?” The corresponding four possible responses are: Stressed; OK; Confident; and I’m not sure, according to PGIM.

For retirement confidence, PGIM asks, “Do you think you’ll have enough savings for the retirement you want?” The three potential responses are: “Yes, I think I’ll have enough”; “I don’t think so, but I’m trying!”; and “I’m not sure.”

 

Index Findings

PGIM’s current retirement confidence index data is as of December 31, 2023.

In the most updated data sagging participant retirement confidence shows the overall confidence grade is “below average,” identical to the previous quarter and the same as one year ago.

Three years ago confidence levels were above average and five years ago the index grade was also below average, according to PGIM.

“As the markets have rallied [in 2024], and if the markets keep going up, I would imagine we’d see more and more improvements over time,” to retirement confidence, Blanchett says.

“The perceptions of risk are changing a little bit, where people are more concerned about things like inflation than they have been historically.”

How to Use the Index

Although the index will be updated quarterly, insights can be pulled out more often by by PGIM, Blanchett says.  

For sponsors, the index, which can be viewed for free could also be useful for enhancing educational sessions, and “if you’re [a sponsor] looking at changing things, this will give [additional] insight [to] … [participants’] overall state of confidence,” Blanchett adds.

Sponsors may use the index to get greater “insight into how individuals’ confidence is changing over time, both in terms of retirement, as well as just general financial well-being,” Blanchett says. “You could look at single males with kids that are between these ages; there’s lots of cuts.”

Data for the PGIM RetireWell Confidence Index is based on responses to an online financial wellness assessment offered by Prudential Financial since April 20, 2017. The questionnaire consists of approximately 25 questions, and more than 300,000 responses have been collected across three different versions since it was introduced. Historically, the assessment was primarily accessed by individuals either through Prudential’s recordkeeping platform or group benefits services.

Data and Research February 2, 2024

Public Sector Workers Value Saving for Retirement, but Struggle With Debt

These workers, many of whom participate in 403(b) plans, are split on whether they are on track to achieve the retirement they envision, according to a Corebridge Financial report.

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While public sector workers generally report doing well financially, many feel stressed about inflation and student loan debt, according to a recent survey conducted by Corebridge Financial. 

As a result, saving for retirement and contributing to their 403(b) plans—or 457 plans—may come as a struggle to public sector workers currently dealing with increased financial stress, says Terri Fiedler, president of retirement services at Corebridge. 

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In addition to those defined contribution plans, approximately 60% of those surveyed also had a defined benefit plan available to them through their employer, according to Corebridge.  

“It’s possible folks [that] were contributing to their workplace 403(b) plan [are] now hesitant because they may be paying off student loans that they thought they weren’t going to have to pay off,” Fiedler says. 

However, Corebridge’s survey of 1,103 public sector workers, conducted in November 2023, found that saving for retirement was their top financial goal. Building an emergency fund and paying off student loan debt were also among these employees’ top financial priorities.  

When asked if having the ability to withdraw, penalty-free, up to $1,000 a year from their retirement plan to pay for emergencies would encourage them to save more in their retirement plan, 23% of workers said they would definitely increase their retirement plan contributions or begin contributing if they have not yet begun. Another 20% said they would “very likely” save more for retirement if they had this ability. 

One of the optional emergency savings provisions from the SECURE 2.0 Act of 2022 that went into effect this year would allow employers to provide this exact benefit, and JoAnne Moore, vice president of thought leadership at Corebridge, suggests that the positive response to this option demonstrates it would be a favorable benefit if offered to 403(b) participants. 

Value of Using a Financial Adviser 

Corebridge also found that public sector workers are relatively split on whether they are on track to save enough money to achieve the retirement they envision, with nearly one-quarter saying they are “not sure.” 

Fiedler emphasizes the importance of having access to a financial professional who can help these workers with their retirement planning. According to the survey, 77% of public sector workers said they do not work with a financial professional. A majority of those who do not work with a financial professional said they would feel more confident about retirement if they worked with one, and 78% of workers who do work with a professional said they feel more confident about retirement because they work with one.  

“I think that’s there’s going to be a blurring over time between physical wellness and financial wellness,” Fiedler says. “If you think about them in terms of circles, there’s your physical health, then there’s your wealth [or] financial wellness, and in the middle of that is your emotional health. If you’re physically not well, if you’re financially not well, it impacts that overlapping, concentric circle, and it impacts your emotional health.” 

Fiedler says financial professionals are helping people with issues beyond just traditional financial planning, such as educating them on assisted living options and what Medicare plan to choose.  

Retirement Income in 403(b) Plans 

When it comes to decumulation strategies for public sector workers, most of those surveyed said they are expecting to fund their retirement using funds from their retirement savings plans (IRAs or 401(k), 403(b) or 457) or from Social Security. Only 9% said they plan to fund their retirement using an annuity. 

With in-plan retirement income options, Fiedler says there is even less movement in the 403(b) space than the 401(k) space when it comes to actual implementation.  

“I don’t think adoption will happen at a great rate of speed,” Fiedler says. “We have to keep in mind, too, that even if the plan sponsor offers in-plan [retirement] income, each participant still has to adopt it [because] it’s not automatic.” 

Moore adds that the survey showed there is an expressed interest in having retirement income-type products or annuities in-plan. When asked if in-plan retirement income was offered as an option, one in four said they would very likely choose that solution, and another half of respondents said they would be “somewhat likely” to choose it. Moore agrees with Fiedler that there is interest in these options, but uptake will be slow.  

Participation, Contribution Rates Up 

Corebridge’s research also found that more than one-third of public sector workers increased contributions to their defined contribution plans in the last year. In addition, 47% said they would most likely increase the amount they contribute when their salary increases, and 14% said they would once they have paid down other debt. 

A recent survey conducted by the Plan Sponsor Council of America found that participation rates in 403(b) plans hit an all-time high in 2022 and that the average account balance for active and inactive plan participants was $90,511. 

“It goes back to education and getting employees to consider increasing their contributions, because I think we all have a role in helping employees take action to achieve their financial goals,” Fiedler says. 

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