Data & Research July 31, 2018

Half of Retirement Savers Are ‘Chasers’

Fifty-four percent of respondents to an Allianz Life survey say that other expenses are interfering with their retirement savings, and 20% say they are saving for other financial goals.

Reported by

Although 90% of active retirement savers agree that accumulating enough savings is important for their future, a significant subset is worried they are too far behind to reach this goal, a survey by Allianz Life found. Among Americans between the ages of 45 and 65 who are saving for retirement, Allianz Life found that 49% are “chasers” who think they need to catch up on their retirement savings.

Eighty-five percent of these chasers think they have fallen behind on retirement savings, and another 85% think it is too late for them to have a comfortable retirement. Ninety-eight percent wish there was a way to make up for lost time, but 63% say they cannot take the chance of investing in higher risk financial products. Only 34% agree that the only way to save enough for a comfortable retirement is to invest in risky financial products.

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

“Among those Americans actively saving for retirement, our study finds a dramatic difference between those who feel on track and those who feel behind, with this subset wishing for ways to catch up but without taking on too much risk,” says Paul Kelash, vice president of consumer insights at Allianz Life. “While it’s a positive that they are actively saving for retirement, the level of anxiety is concerning, and many are simply not aware of potential solutions to help catch them up.”

Chasers have a mean portfolio balance of more than $400,000. Fifty-four percent say that other expenses are interfering with their retirement savings, and 20% say they are saving for other financial goals. Sixty-six percent of chasers worry they will run out of money in retirement, and 61% think they will need to keep working.

Only 53% of chasers have an individual retirement account (IRA), and only 35% own stocks. Thirty-five percent own mutual funds, 53% have a pension, and 28% own an annuity. Eighty-four percent are interested in a financial products that offers growth potential plus protection against loss, and 71% of chasers are willing to give up some upside growth potential in order to have protection from losses. Only 39% of chasers are working with a financial professional.

Allianz Life’s findings are based on an online survey of 1,007 adults last April.

Data & Research July 30, 2018

Retirement Plan Leakage Thwarts Automatic Enrollment

A TIAA study finds the feature's benefit are continuously offset by pre-retirement withdrawals and plan loans. 

Reported by

With benefits from kick starting retirement savings to fostering participant engagement, automatic enrollment has proven itself to be an important plan feature. Yet, this does not acquit it from including its own set of drawbacks.  

A recent TIAA Institute survey examined the utilization of outstanding loans and withdrawals in accordance to automatic enrollment, otherwise known as “leakage” and found that “among households under the age of 55, each dollar contributed to a 401(k) plan or similar tax-advantaged retirement account is offset by approximately 40 cents in pre-retirement taxable withdrawals.” While automatic enrollment generates positive effects, the report argues how these results are counterweighed by pre-retirement withdrawals.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

Survey results were extracted from a Fortune 500 company, when the company had initiated a 2% default contribution rate for employees hired after July 2005 until 2013. The study compared employees hired in the first year after the automatic enrollment implementation, to those employed during in the 12 months prior.  

Among other findings, the study reported automatic enrollment raised “total potential retirement system balance by 7% of starting pay eight years after hire.” However, unrolled loans and withdrawals increased by 3% of starting pay, which in turn, offsets “approximately 40% of the potential increase in savings from automatic enrollment,” according to the study.

Additionally, the study says automatic enrollment at the company elevated retirement system balances by 4% to 5% of “first year pay eight years after hire.” However, for those tenured employees who remained with the company, leakage in the form of plan loans were found to offset 9% to 27% of potential savings. For low-level tenured employees who no longer stayed with the company, leakage (as non-rollover withdrawals) accounted for over half of budding savings. The study points out that while these numbers decline for separated employees over time, the rate after eight years still surpassed 40%.

More information about the study can be found here.

«