Data & Research September 29, 2011

Participants Renewing Retirement Savings Focus

Results from the Mercer Workplace Survey show U.S. retirement benefit plan participants are dramatically more pessimistic about their economic expectations than just one year ago.
Reported by

The percentage of participants expecting a recession has nearly doubled (42% versus 23% in 2010). Participants have internalized this gloomy economic outlook with a record number of participants fearing job loss (45%, up from 36% in 2010) and planning to delay retirement (44% up from 35% in 2010)..

According to a news release from Mercer, there typically is a direct correlation between economic outlook and retirement behavior. This year, however, despite deep economic concerns, participants seem to be renewing their focus on retirement savings and gaining confidence in their ability to do so. “In 2010, most participants saw the economy improving but not their own personal situation – a highly unusual divergence,” said Suzanne Nolan, Partner and Director of Marketing and Communications for Mercer’s U.S. Outsourcing business. “This year’s results reflect a stunning reversal in terms of a highly negative view of the economy but a renewed commitment to and accountability for their own retirement planning.”

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

Proof of this renewed focus and confidence on retirement savings is reflected in several data points from the Mercer Workplace Survey. For example, over the past year 41% of participants claimed to have increased their 401(k) contribution rate (up from 31%), 40% reallocated existing portfolios (up from 33%), and 38% reallocated their future contributions (up from 29%). In the coming year, participants also plan to contribute more to their 401(k) plans, and a slightly higher percentage expect to contribute the tax-deferred maximum (11%, up from 8% in 2010).

These positive actions mirror a corresponding shift in attitude, with participants becoming more accountable for their key retirement decisions. Eighty-five percent of participants feel confident in their 401(k) asset allocation, 83% in their investment selection, and 77% in their contribution amount. These results are all improvements over 2010 results and top some levels found in pre-recession responses.

“We believe this increase in personal accountability among retirement plan participants is ‘good news’ for plan sponsors and their on-going efforts to increase employee engagement levels,” said Nolan. “Participants seem to be saying that they can no longer rely on market performance, their employer or the government to build their retirement savings for them, but must take control of every aspect they can in order to provide for a successful retirement. Employers and plan sponsors alike should see this as a unique opportunity to offer and promote tools and resources to assist participants in making informed retirement decisions.”

The Mercer Workplace Survey tracks employee attitudes toward, and experiences with, employer-sponsored retirement, health and benefits programs. The survey represents a national cross-section of active 401(k) participants defined as those currently contributing to a 401(k) plan irrespective of balance or having a 401(k) balance of $1,000 or more with their current employer, whether or not they are currently contributing. Online interviews were completed with 1,507 participants between June 16 and July 1, 2011.

The Markets September 29, 2011

Investment Managers Say U.S. Not Entering Double-Dip Recession

More than three quarters (79%) of investment managers surveyed in the latest Russell Investments Investment Manager Outlook (IMO) survey say they do not believe the U.S. economy is entering a double-dip recession. 
Reported by

When this subset of managers (the 79%) were asked what economic indicators support their position, 78% cited strong corporate balance sheets and high corporate profit levels, and nearly half (49%) also pointed to the U.S. Federal Reserve’s decision to keep interest rates low until mid-2013. Other economic indicators cited by managers as support for their opinion include declining oil prices and U.S. dollar weakness. While they do not see a recession coming, 62% of this majority group indicated that they do expect growth to remain low for the next several years.

Among those managers who believe the U.S. economy is entering or already in a double-dip recession (11% and 10%, respectively), recovery in employment levels was cited by 95% as the key requirement for either avoiding or leading the U.S. out of recession. This group also pointed to the need for improved consumer confidence/consumption (45%) and the resolution of U.S. and/or European debt issues (both 40%).

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

“We have seen a consistent spate of negative economic news that has certainly impacted investors’ confidence in the markets and we continue to see notable volatility. Yet among professional money managers we are seeing a focus on fundamentals such as strong corporate profits that is supporting an overall bullish sentiment, particularly for large cap U.S. corporate stocks,” said Rachel Carroll, Client Portfolio Manager at Russell Investments. “While we believe managers’ low expectations for overall economic growth are realistic, the collective bullish sentiment and their views on market valuations indicate that they see a buying opportunity in the equity markets.”

Debate about the double-dip recession aside, more than half of the managers surveyed (57%) say the market is currently undervalued – more than double the percentage that felt the same in the June 2011 survey (26%). Only 10% of managers currently believe the market is overvalued, and 32% believe it is fairly valued (dropping from 61% in June).

Manager optimism regarding U.S. large cap equities saw an increase in the latest survey, likely reflecting their views on opportunities in the equity markets. Bullish sentiment for U.S. large cap growth stocks increased 13 percentage points from the June survey to 73%, and bullishness for U.S. large cap value stocks hit an all-time survey high at 63%, up 14 percentage points from June.

Bullishness for emerging market equities also saw a notable increase in the latest survey, reaching an all-time survey high at 74%, up 15 percentage points from June. Over the same period, bullishness for non-U.S. (developed market) equities fell eight percentage points to 45%.

IMO is a quarterly survey conducted by Russell Investments. The latest survey took place between August 23 and September 2. For more information on the survey, visit http://www.russell.com.

«