Data & Research August 16, 2022

Workers Remain Worried About Inflation’s Impact on Retirement

High inflation is among the top concerns of retirement savers, but a new survey suggests financial advice can help boost confidence.

Reported by



A recent study from Schwab Retirement Plan Services says inflation is now the top obstacle to saving for a comfortable retirement, which has prompted many employees to change their financial habits and seek advice on steps they should take.

According to Schwab’s “2022 Participant Study,” workers rank inflation ahead of other retirement planning obstacles, with 45% saying inflation is a major obstacle today. This is substantially higher than those who cite monthly expenses (35%), stock market volatility (33%), unexpected expenses (33%), credit card debt (24%) and saving/paying for children’s education (21%).

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

“Workers have been through a lot over the past two years and it’s only natural that recent economic and geopolitical turbulence has continued to fuel financial concerns,” said Catherine Golladay, head of Schwab Workplace Financial Services, in a press release. “While plan participants can’t control inflation or the markets, the good news is they are taking steps to manage their finances with an eye to the future.”

Just under half (47%) of workers feel they are very likely to meet their retirement savings goals, compared with 53% from last year, the study says. The percentage of those who feel somewhat likely to meet their goals increased from 39% to 40%, while those who feel unlikely to do so increased from 8% to 13%. On average, workers think they need $1.7 million saved for retirement, down from $1.9 million a year ago.

Inflation has clearly come for workers’ wallets, however: 79% of respondents said they have had to reduce spending as well as their savings, per the study. Workers are cutting spending by reducing the number of purchases they make (34%), buying cheaper products (32%) and paying off debt more slowly (21%).

In general, the study says, workers are saving less and spending more. They are saving less in their emergency funds, investing less outside of their 401(k)s and contributing less to their 401(k)s.

One-third of plan participants do not know how long their savings are likely to last, but for those who do, the average expectation is 23 years, the study says. One-quarter of respondents said the pandemic will delay their retirement.

As workers have had to worry more about their financial situation, stress has had an impact on some, the study says. Only 15% of employees said they have not been under financial stress, and more than a quarter of respondents (26%) said stress about their financial situation has affected their ability to do their job in the past year.

The majority of employers (60%) took action to help workers manage financial stress. Help came in various forms, including increased pay (32%), increased 401(k) matching (23%) and additional bonuses (20%). Some employers also decreased hours to allow for better work-life balance (11%).

Most workers said that financial advice would increase their confidence. More than half (55%) said they would be very confident making 401(k) investment decisions with the help of a financial professional, compared with just 38% who said they are very confident making 401(k) investment decisions on their own.

Workers expressed a desire for specific advice on a range of financial questions, such as how to invest their 401(k) (43%); how much money to save for retirement (42%); how to create an income stream in retirement (38%); at what age they can afford to retire (36%); what tax expenses in retirement will be (32%); what other expenses in retirement will be (31%); how to manage current expenses to save more money for retirement (30%); how to catch up on retirement savings goals (28%); and how to manage debt (26%).

However, workers see barriers to accessing advice through their workplace plan, and many don’t receive such advice, the study says. They cited cost (23%), advice limitations (22%), lack of awareness (19%) and confidentiality concerns (18%) as reasons they wouldn’t seek financial advice via their employer.

“Workers are facing an array of economic challenges that are driving their demand for financial advice. Employers can help by debunking misconceptions about financial advice available through the workplace,” said Golladay. “Many employers offer different levels of advice at no additional cost or low cost, and workers tell us making 401(k) investment decisions with the help of a financial professional would make them more confident, which is one of the most important factors in their financial well-being.”

Compliance August 16, 2022

Dover Corporation Faces ERISA Suit Over Managed Account Fees

The proposed class action lawsuit challenges excessive managed account fees and the retention of Financial Engines, the managed account service provider.

Reported by

Plaintiffs have filed a new Employee Retirement Income Security Act lawsuit in the U.S. District Court for the Northern District of Illinois, naming the Dover Corporation and various related entities as defendants.

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

The proposed class action lawsuit suggests the Dover Corporation permitted the payment of excessive recordkeeping and managed account fees within the defined contribution retirement plan it offers to its employers. The suit also suggests the plan fiduciaries’ retention of the managed account provider, Financial Engines, constituted a violation of ERISA.

“Defendants, as fiduciaries of the plan, breached the duty of prudence they owed to the plan by requiring the plan to pay excessive recordkeeping fees and managed account fees, and by failing to timely remove their high-cost recordkeepers,” the complaint states. “These objectively unreasonable recordkeeping and managed account fees cannot be contextually justified and do not fall within the range of reasonable judgments a fiduciary may make based on her experience and expertise.”

According to the complaint, the defendants “unreasonably failed” to leverage the size of the plan to pay reasonable fees for plan recordkeeping and managed account services.

“ERISA’s duty of prudence applies to the conduct of the plan fiduciaries in negotiating recordkeeping and managed account fees based on what is reasonable (not the cheapest or average) in the applicable market,” the complaint states. “The unreasonable recordkeeping and managed account fees paid inferentially tells the plausible story that defendants breached their fiduciary duty of prudence under ERISA. These breaches of fiduciary duty caused plaintiff and class members millions of dollars of harm in the form of lower retirement account balances than they otherwise should have had in the absence of these unreasonable plan fees and expenses.”

Dover Corporation declined to comment about the allegations in the lawsuit.

The suit’s filing comes in the wake of multiple prior suits that have included substantially similar allegations against other defendants who hired and retained Financial Engines as a managed account provider. In the new lawsuit, Financial Engines itself is not named as a defendant, but its actions and operations feature in the allegations.

Some of the prior cases, on the other hand, have included allegations leveled directly against Financial Engines, such as in the ERISA lawsuit filed in 2018 against Home Depot. In that case, the district court issued a detailed ruling that addressed respective motions to dismiss filed by Alight Financial Advisors, Financial Engines Advisors and the Home Depot defendants. The court granted Alight’s and Financial Engines’ motions to dismiss, in which the defendants argued they were not, given their contracted roles and inability to set their own compensation levels as service providers, liable for the fiduciary breach claims alleged in the suit. The dismissal motion filed by the fiduciary Home Depot defendants, on the other hand, was denied.

The new case against Dover Corporation comes at a time when the broader retirement plan industry is increasingly focused on personalized investment services. For example, according to Deloitte’s new report, “The Rewards and Risks of Managed Account Programs in the Wealth Management Industry,” assets in managed account programs have grown by 117% since 2012, and they now make up a substantial portion of assets under management and a majority of new asset flows for the wealth management industry.

The Deloitte report says this growth reflects a long-term industry trend away from commission-based brokerage offerings towards fee-based advisory offerings. Managed account programs are poised for continued growth, the report concludes, especially as more firms have announced plans to make them a strategic priority.

«