Benefits April 29, 2014

Retirement Could Be the Best Time in Your Life

April 29, 2014 (PLANSPONSOR.com) – When asked what stage in life they remember most fondly, both Centenarians and Baby Boomers express the most nostalgia for their 30s (20% and 24%, respectively).
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Boomers also reflect fondly on their 20s (20%). However, according to a survey by UnitedHealthcare, 9% of Centenarians express the most fondness for ages 70 and up, and 3% say the best time in their life is now.

Both Centenarians and Baby Boomers feel younger than their age. The ninth annual UnitedHealthcare 100@100 survey finds, on average, Centenarians say they feel just 83 years old, while 65-year-old Baby Boomers say they feel 55.

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When asked about living to the age of 100, Centenarians say they feel blessed (36%), happy (31%) and surprised (12%). Only 3% say they feel lonely. More than half 53% report they live independently, without the support of a caregiver to help them with their daily activities.

In terms of life goals, 53% of Centenarians say they have accomplished everything they would like to do, while nearly one-third feel 100 years just wasn’t enough. Twenty-two percent say they would like just a few more years, and 8% say it would take many more years to accomplish all of their goals.

Staying Well in Body and Spirit

For Centenarians, the keys to healthy aging are staying close to friends and family (91%), maintaining a sense of independence (88%) and eating right (86%). Baby Boomers’ keys to healthy aging have to do with mindset; maintaining a sense of independence tied with having a sense of humor (87%), followed by staying close to family and friends (84%).

Both age groups say they actively manage their physical health. Nearly nine in 10 see their primary care physician for an annual exam (87% of Centenarians and 89% of Baby Boomers). More than seven in 10 keep up with their vaccines, such as flu shots and shingles vaccinations (73% of Centenarians and 72% of Baby Boomers). Similar numbers report getting their eyes examined regularly (71% of Centenarians and 76% of Baby Boomers).

“This year’s survey paints an encouraging and exciting view of longevity in the United States, which is especially significant since the number of Centenarians in this country is expected to swell in the coming years,” says Rhonda Randall, chief medical officer of UnitedHealthcare Retiree Solutions, based in Minnetonka, Minnesota. “Both centenarians and Baby Boomers report feeling more youthful than the number of birthdays they’ve had, which is in part due to the proactive measures they’re taking to monitor and improve their health. This is a good reminder for all Americans to take charge of their health now so that they can enjoy life for many years to come.”

In addition to preventive care, both Centenarians and Boomers are staying active, with most walking or hiking at least once per week (56% and 74%, respectively). About one-third of Centenarians and Boomers do strength-training exercises every week (32% and 37%, respectively). Other top physical activities include indoor cardio exercise (23% of Centenarians and 39% of Boomers) and gardening (21% of Centenarians and 47% of Boomers).

Nostalgia and Milestones

Both Centenarians and Boomers say getting married and the birth of a child are the two life milestones they remember most warmly, but they prioritize the two events differently. Boomers are more likely to choose the birth of a child (32%) over getting married (20%), as opposed to Centenarians, who chose getting married (27%) over the birth of a child (14%). Boomers’ next-favorite milestone is the birth of a grandchild (12%). For Centenarians, it is completing their education and securing their first job (5% for each).

While many Americans can relate to the concept of turning into their mother or father, in terms of behavior, with age, this not the case for the Boomers and Centenarians surveyed. Around half of respondents feel this has never happened to them (39% of Centenarians and 48% of Boomers). Of those who say they eventually “became” their mother or father, Centenarians are most likely to say it happened in their 20s (15%), while Boomers say it happened in their 50s (13%).

Pessimism About the Future

Fifty-eight percent of Boomers say the United States is headed in the wrong direction, but just 36% of Centenarians agree. Boomers are also more likely than Centenarians to say Americans’ values have worsened during their lifetime (76% compared with 45% of Centenarians).

One thing on which both groups agree is that the country seems to be in more discord than ever. Despite having lived through several tense time periods, including the civil rights movement and the Vietnam War, 59% of Centenarians and 73% of Boomers believe now is the most politically divided the country has been in their lifetime.

Fifty-six percent of Centenarians and 39% say they did not expect to see an African American president in their lifetime, but both groups anticipate another historic first in our nation’s leadership: A majority of Centenarians and Baby Boomers expect to see a woman as president in their lifetime (60% and 85%, respectively).

The survey cites U.S. Census Bureau projections that the Centenarian population will grow to more than 600,000 by 2050. And this year’s survey finds 29% of Baby Boomers say they expect to hit the century mark.

For the survey, market research firm Penn Schoen Berland interviewed 104 Centenarians (U.S. residents who are at least 100 years old or who will turn 100 this year) and 302 Baby Boomers (currently 65 years old or who will turn 65 this year) by phone between February 6 and 24.

The survey report is here.

Benefits April 29, 2014

Another Quarter of 401(k) Balance Growth

April 29, 2014 (PLANSPONSOR.com) – New analysis from Fidelity Investments shows the average balance of its client’s 401(k) accounts reached $88,600 during the first quarter of 2014, boosted by automatic plan features and strong markets.
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This represents a 9% increase from $80,900 one year earlier, Fidelity says, and a gain of 92% over the five years since the first quarter of 2009—the market low of the economic downturn—when the average was $46,200. For pre-retirees age 55 and older, the average balance is $165,000, Fidelity says.

“It’s encouraging to see such positive savings results for millions of Americans in the five years since the market downturn, both in 401(k)s and IRAs,” says Julia McCarthy, executive vice president of workplace investing at Fidelity. “But even with this quarter’s positive news, there is still more that can be done to improve outcomes in retirement.”

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Overall, still only about one in four (26%) employers automatically enroll employees in their retirement plan. And even for plans with auto-enrollment features, getting more employees to start contributing isn’t always enough to improve plan outcomes. The numbers suggest employers must also take action to help workers save more, Fidelity says.

Fidelity’s average employee deferral rate is 8%, yet for those who were auto-enrolled into a 401(k) plan, the average deferral rate is only 5%. This is in part because 73% of employers with automatic enrollment onboard employees at 3% of annual income or less, so even with an average employer match contribution of 4.4%, the savings rate for many auto-enrolled employees still falls below Fidelity’s recommended annual total savings rate of 10% to 15%.

Fidelity says annual increase programs (AIP), also referred to as auto-escalation features, can be powerful tools to help employers have a positive impact on their employee’s retirement readiness. AIPs typically increase deferrals by 1% per year to automatically raise an employee’s total savings to the desired rate.

Fidelity’s data shows that, over the last year, about 20% of employees increased their personal savings rate—the highest percentage since Fidelity started tracking the number seven years ago. Nearly two in five (38%) deferral increases were due to auto-escalation, and of Fidelity’s Generation Y employees, half of all deferral increases were due to such features.

Some form of AIP is offered by 77% of Fidelity 401(k) plan sponsors, but only 12% of this group uses truly automatic escalation features under which employees must actively choose not to automatically increase their contributions annually. With only 7% of employees opting out of Fidelity plans once automatically enrolled, Fidelity says the data is clear that employers can help drive savings rates even higher by incorporating auto-escalation into their auto-enrollment process.

“We understand that saving for retirement competes with numerous financial goals such as the purchase of a home, college tuition and the escalating costs of health care in retirement,” says McCarthy. “Fidelity recommends companies offer automatic features to promote participation and annual savings increases by employees. And we urge investors to take advantage of additional savings opportunities such as individual retirement accounts (IRAs) and health savings accounts (HSAs), if available, to help build their individualized retirement paycheck.”     

Fidelity says the first quarter 401(k) data again underscores the positive impact financial advice and education can have in helping employees make informed decisions about their retirement savings and investment strategies. In 2013 Fidelity noted a 42% increase in guidance sessions, and of those employees who consulted with a financial adviser, 37% took a positive action, such as increasing the savings rate or reviewing asset allocations.

An infographic depicting the role AIP plays in boosting retirement savings can be downloaded here. The quarterly 401(k) update is available here.

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