A Prudential Retirement news release said its Fifth Annual Workplace Report on Retirement Planning found that 66% of workers in the 21 to 30 year old age group – which Prudential labels the “Millennial Generation” – would feel “grateful” or “optimistic” if employers automatically enrolled them in workplace-provided defined-contribution (DC) plans. That would produce better financial results and lead to more-secure retirements, many workers felt.
Moreover, the survey revealed that young workers would be equally enthusiastic about an automatic approach to other key components of DC plan management, including
- mandated minimum-contribution rates. Some 54% of young workers said they would feel “grateful” or “optimistic” if plan sponsors imposed this requirement.
- a program of gradually but automatically increasing contribution levels. More than half of the respondents said they would support this plan feature.
- defaults into investment options that employ asset-allocation modeling based on age and risk-tolerance. A clear majority said “go for it” or “give it a shot.”
Reacting to the entire spectrum of features, 57% of young workers said “no doubt about it” or “feeling good” when asked about automatic defined contribution plans. Some 53% said putting their workplace-provided program on auto pilot would deliver “far superior” or “somewhat superior” retirement outcomes when compared with the current do-it-yourself approach.
“Today’s youngest workers are keenly aware that the existing ‘do-it-yourself’ approach to managing workplace-provided defined contribution programs isn’t delivering the retirement security Americans want and need,” said John Kim, president of Prudential Retirement. “In this environment, our survey demonstrates that the nation’s youngest workers would welcome a ‘radical’ new approach, one that effectively replaces individual accountability with professional management.”
The Prudential survey also found that support for a new approach to defined contribution plan design isn’t limited to the Millennial Generation.
Responding to a similar set of questions, the oldest component of America’s workforce – Baby Boomers over the age of 55 and pre-retirees under the age of 64- not only backed the autopilot idea, they enthusiastically recommended the approach to younger workers. By an overwhelming margin, they also agreed that they would be better prepared for retirement today if automatic plan features had been in place 30 years ago.
In addition, approximately 70% of older workers favored the full menu of automatic plan features over “doing it yourself,” responding “go for it” or “feeling very good” when asked to estimate the long-term effect of an auto-pilot approach on retirement security. Not surprisingly, older workers also strongly endorsed the automatic defined contribution plan concept for younger workers.
More information is at www.prudential.com.