Retirement Plan Participants Want Simple Guidance

Seventy-five percent of participants surveyed indicated they would be willing to be automatically enrolled in a 10% savings “boot camp” for six months.   

Automatic features offered by employers to encourage participants to save, such as auto-enrollment and auto-escalation, are preferable but not well understood, with 74% of respondents indicating that “making me automatically do something like save more or invest in a professionally managed fund” would improve their retirement readiness.   

“If you make it actionable and automated, it’s likely to succeed,” said Kristi Mitchem, senior managing director and head of Global Defined Contribution for SSgA, during a press event.

Awareness of long-term investment risks is limited, such as the risk associated with inflation and ownership of company stock. Forty-three percent of respondents that are aware of the U.S. inflation rate have considered its effects on their retirement, but do not know what to do about it. Sixty-eight percent responded favorably to a plan solution that not only limits the risk of a significant loss in their company stock holdings, but also puts a small limit on the upside.   

“Plan participants communicated loud and clear about what they need: simple steps and automated features,” said Mitchem. “One of the most surprising and encouraging findings is the willingness of participants to take 401(k) direction from their employers. The ongoing volatility in the financial markets has increased anxiety amongst plan participants and a significant percentage want simplified and prescriptive guidance in order to make progress toward their retirement goals.”   

The survey concluded that 54% of participants say they are “very” or “somewhat confident” that their savings are on track to fund their planned retirement lifestyle. Other participants have a much less optimistic outlook. Most place the blame on themselves, with 55% indicating they lack confidence because their rate of savings is not high enough, and 52% indicating they did not start saving early enough. Others blame the economy or the financial markets, and only a few blame their employer.  

Mitchem said many participants are not aware of the tools available to them. The survey found that 28% are unaware of whether their plan offers automatic escalation, 21% call center advice, 20% educational workshops and 20% target-date funds.

The impact of the financial crisis and the generational differences in attitudes also impact retirement strategies. Seventy-three percent of the youngest workers, ages 18-24, said the recent volatility prompted them to save more, versus 37% of the general population. Younger savers are more conservative and more likely to save than their older counterparts. Forty-two percent of workers ages 18-24 identified themselves as savers versus 23% of the general population.

The survey included responses from more than 1,000 401(k), 403(b), profit sharing and stock purchase plan participants.