In their third annual “2011 DC Participant Experience Study,” KK & Company and Greenwald & Associates concluded that retirement plan advisers and providers have ample opportunity for growth at the time participants retire. This opportunity has been created by a confluence of factors, the market-research firms found, such as:
- Forty-five percent of participants plan to roll their account value to another company when they retire
- Half (48%) have worked with a financial adviser on retirement planning.
- Two-thirds (65%) do not have a written financial plan
“The main reasons for rolling money out is the relationship the participant has with another financial institution or adviser,” said Matthew Greenwald.
The involvement of most participants in their retirement plan can best be described as reactive, the firms report. Sixty-seven percent only review the plan balance when it is sent to them and another 5% do not look at the communications they receive about the plan. Seventeen percent go online at least monthly to make changes, if needed.
In addition, the major increase in the number of participants who will retire with significant assets during the next decade is worthy of attention, the report contends. Near-retirees (ages 55-70) have more assets to invest than the “average” participant:
- 21% have $50,000 to $149,000
- 17% have $150,000- $249,000
- 18% have $250,000- $499,000
- 10% have more than $500,000
“According to U.S. Census Bureau data and projections, our old population pyramid is shifting rapidly,” says Kendall Kay, president of KK& Co. “In 2000, 32 million of the 320 million U.S. population were ages 55-69. By 2010, this segment had grown 50% to 47 million. This growth will continue and by 2020 the estimate is for 59 million people in this age band, effectively doubling in just two decades.”
KK & Company and Greenwald & Associates assert that there are five areas that could be enhanced for advisers and providers to maximize this opportunity:
1. Participant relationship management
2. Pre-retirement education and planning
3. Retirement income education and management
4. Development of new products that deliver dependable retirement income and guaranteed lifetime income
5. Enhanced Web site functions
Greenwald & Associates and KK & Company surveyed 1,000 defined contribution plan participants. Respondents were at least 21 years old, employed full-time, and enrolled in their employer’s plan, regardless of whether they make contributions to the plan.