Participants May Evolve, But Some Things Remain the Same

Northern Trust Asset Management has published its 2017 Participant Survey, suggesting there is a clear shift occurring in the attitudes towards retirement savings, investing and expectations around retirement.

Yet some aspects of the retirement planning conversation remain the same. Notably, both retirees and workers still say the best piece of guidance in helping them prepare financially for retirement is learning how much money they will need to be financially secure. According to the Northern Trust data, 43% of workers say they estimate they will need $1 million or more to retire. Interestingly, only 25% of current retirees reported they needed a nest egg of that size.

The data also shows the measures for long-term investing success are changing. Workers are more likely to look at account balances and monthly income compared with retirees as lead measures of success. Retirees, on the other hand, are more likely to look at investment performance as the lead measure for success, and they more often rely on a financial adviser to tell them how they are doing.

Additionally of note heading into 2018, Northern Trust says there is evidence that workers are “starting to care less about the actual managers of the products and more about the product’s objectives.” Specifically, less than half of current workers (47%) view the manager brand name as very important or critical in selecting the option, compared with 62% of retirees.

“Risk is always top of mind in retirement investing, but risk has many components that must all be understood,” researchers note. “While individuals tend to focus on the risk of losing money, it’s often equally important to think about the danger of not taking enough risk to meet your objective.”

The participant survey also shows evidence of an ongoing reevaluation of target-date funds.

“Target-date products are no the modular asset-allocation set it and forget it type options that asset managers first launched many years ago,” the analysis states. “They continue to evolve as greater focus is applied to understanding investors and their actual retirement needs.”

The data shows overall satisfaction with target-date funds remains consistent, with 91% of works satisfied with their funds. Satisfaction with respect to performance has improved 10% this year, to 92%.

Additional findings are available here.