Employees, Employers Disclose Major Gaps in Retirement Awareness

American Century Investments’ 12th annual national retirement survey highlighted a widening disconnect between retirement plan sponsors and participants which could be bridged by plan advisers’ knowhow. Surveying 1,500 full-time workers aged 25 to 70 and 500 plan sponsor representatives, ACI found disconnects in confidence, risk perception and understanding of retirement products, which can all shape future retirement readiness.

Gaps in Confidence, Risk Tolerance

While 56% of surveyed plan sponsors thought their employees were ready to manage finances without a paycheck, 42% of surveyed participants agreed. Fewer than half said they were equipped to navigate key transition decisions such as Social Security timing, budgeting or required minimum distributions. Among participant respondents, 30% reported believing they would need to retire earlier than expected due to health or caregiving needs.

There was also a substantial gap between participant risk tolerance and sponsor assumptions. Self-reported comfort with market risk declined, with only 19% of participants describing themselves as very accepting of market risk, down from 24% in 2024. Although about two-thirds of surveyed participants said they remained calm during market volatility, their confidence in recovering from losses fell to 59%, compared with 63% in 2024.

Sponsors, meanwhile, tended to overestimate participant appetite for risk—while 46% of participants nearing retirement reported comfort with losing 10% or less of their account balance during a downturn, sponsors reported believing that 77% of participants could tolerate losses greater than 10%.

Target-Date-Fund, Guaranteed Income Misunderstandings

Target-date funds remained a core retirement plan option, yet survey respondents did not agree on how they function best. The survey found 68% of participants preferred moderate TDFs, compared with an 18% preference for conservative and 14% for aggressive. Meanwhile, 38% of sponsors favored aggressive TDFs, compared with 36% for moderate and 26% for conservative.

Nearly 62% of participants said they believe (incorrectly) that TDFs provide income, and 34% said they thought TDFs guarantee protection against losses (also incorrect). With participants relying on TDFs for features they do not offer, these misconceptions highlight significant potential risks.

Demand for predictable retirement income continued to grow. Among participants, 93% expressed interest in guaranteed income solutions, and about 60% said they would allocate at least 30% of their savings to an in-plan income product. Plan sponsor interest was increasing, but still cautious: About one-third of sponsors said they are evaluating guaranteed income solutions, but many remain uncertain about implementation, fiduciary responsibilities and participant education.

How Advisers Can Boost Retirement ‘Literacy’

About 80% of participants said they needed help turning savings into reliable retirement income, and 86% of plan sponsors agreed more support was necessary. Despite this alignment, resource availability lags: Only 44% of sponsors reported offering tools to help retirees manage finances, and just 40% said they provide guidance on generating income from savings.

Glenn Dial, a senior retirement strategist at ACI, said in a statement that transitioning into retirement creates concerns related to income sustainability and market risk. Advisers, he said, were uniquely positioned to understand participant anxieties—from fears of insufficient savings to uncertainty about maintaining income—and to provide guidance tailored to those needs.

Dial encouraged sponsors to take a deeper inventory of participant risk preferences and align investment options accordingly. Key recommendations included providing more robust, personalized education on TDFs and guaranteed income features; reinforcing early and consistent saving behaviors; and offering tools that help employees create reliable retirement income.

Study organizers recommended that participants use available educational resources, ask targeted questions about investment options and set specific retirement goals. Dial advised participants to learn how various retirement income products—TDFs, annuities and managed payout strategies—function; to seek one-on-one guidance from advisers during their transition to retirement; and to ensure that investment strategy supports long-term income needs.