Data & Research May 24, 2022

Retirement Prospects in the US: ‘Not Great, Not Bad’

Among U.S. workers who have already retired, just 3% describe their situation as ‘living the dream,’ while 37% say they are comfortable.

Reported by

Schroders has published its 2022 U.S. Retirement Survey, sharing new data that underscores the concerns many Americans are feeling about their financial prospects in retirement.  

Strikingly, among those who have already retired, just 3% described their situation as “living the dream,” while some 37% said they are comfortable. Another 37% said retirement is “not great, not bad,” and 18% are struggling. This leaves 5% “living the nightmare,” according to the survey.

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

Part of the challenge is that a considerable number of retirees (44%) said their expenses in retirement are higher than expected. On the other hand, just 8% said expenses are lower than anticipated.

According to the Schroders analysis, working Americans said on average it will take $1.1 million in savings to retire comfortably, but 56% said they expect to have less than $500,000 saved, including 36% forecasting less than $250,000 in savings. About one-quarter (24%) expect to reach the $1 million mark in retirement savings.

Schroders’ experts say the data in the new report suggests the retirement picture in the U.S. is not improving, and may even be declining. Last year, the percentage of working Americans nearing retirement age (defined here as 60 to 67 years old) who said they have enough money to retire was 26%. This year, that number has declined to just 22%.

In the preretirement group, a third said they would need to win the lottery to attain their dream retirement. A quarter said they would need to sacrifice what they want today to save for later years, while another quarter said they feel they can remain on the same path.

A Bevy of Concerns

According to the survey, the top concerns Americans have about retirement include the following:

  • Inflation lessening the value of assets (65%);
  • Higher than expected health care costs (64%);
  • A major market downturn significantly reducing assets (53%);
  • A health issue draining savings (52%);
  • Taxes reducing retirement savings (49%); and
  • Not being able to afford the lifestyle they desire (49%).

In large part due to these concerns, a substantial 69% of working Americans plan to work in retirement. They will do so primarily to help cover basic living expenses (56%), to stay busy (51%) and to keep active and stay in good health (49%), the survey found.

Joel Schiffman, Schroders’ head of intermediary distribution for North America, says these statistics show workers and retirees are facing “seriously challenging times,” and the situation seems to be taking a toll on people’s comfort and confidence.

“This year, inflation is the number one concern Americans have about their retirement, and next year, it may be something else,” he points out. “Challenges will come, but they can’t derail our focus on saving and preparing for our retirement.”

Proper Planning Boosts Confidence and Outcomes

According to the survey, fewer than one in four respondents (23%) reported having a written retirement plan to guide their decisions, while 40% have done some planning but don’t have a formal plan. This leaves 37% not having done any planning. 

The data shows 76% of those without a current plan in place find the idea of planning overwhelming, and 56% believe it doesn’t make sense because life is so uncertain. However, among those who have done retirement planning, a large majority (91%) said their plan has been useful to them, with 33% saying it has been “critical” to putting them on a better path for retirement. Only 9% reported that they don’t pay attention to their current plan.

“Given the relatively small percentage of Americans who have taken the time to create a specific plan for generating enough assets for retirement, it’s not surprising to see that many believe a dream retirement is out of reach,” Schiffman says. “As an industry, we need to drive the benefits of planning, of investor education, of starting sooner to save in defined contribution plans and IRAs and investing for growth. Investors have to understand how the money they save now will drive income in retirement. This is especially important during times of great volatility like today that can shake anyone’s confidence and compel investors to leave the market. The good news is, it’s never too late to embark on the planning process and improve your retirement readiness.”

Compliance May 24, 2022

BNY Mellon Adviser Settles SEC Charges Over Greenwashing, Pays $1.5 Million Penalty

Case focused on misstatements and omissions regarding ESG offerings.

Reported by

BNY Mellon Investment Adviser has agreed to pay a $1.5 million penalty following charges brought by the Securities and Exchange Commission alleging that the company’s statements about its environmental, social and governance funds included misstatements and omissions.

Under the settlement agreement, announced Monday, BNY Mellon Investment Adviser consented to the SEC’s order finding it violated the Investment Advisers Act and the Investment Company Act, but it did not admit or deny the SEC’s findings. The company promptly took action to correct the issues and cooperated with the investigation, according to the SEC, and agreed to a cease-and-desist order and a censure, along with the fine.

“Registered investment advisers and funders are increasingly offering and evaluating investments that employ ESG strategies or incorporate certain ESG criteria, in part to meet investor demand for such strategies and investments,” Sanjay Wadhwa, deputy director of the SEC’s division of enforcement and head of its climate and ESG task force, said in a statement. “Here, our order finds that BNY Mellon did not always perform the ESG quality review that it disclosed using as part of its investment selection process for certain mutual funds it advised.”

The order focused on BNY Mellon Investment Adviser’s responses to ESG questions on requests for proposals on its Overlay Funds. These funds are separate from the unit’s Sustainable Funds, which incorporate ESG principles as part of their main investment strategy. The Overlay Funds include six individual funds (BNY Mellon Global Equity Income Fund, BNY Mellon International Equity Fund, BNY Mellon Variable Investment Fund – International Equity Portfolio, BNY Mellon Global Real Return Fund, BNY Global Emerging Markets Fund and BNY Mellon Global Dynamic Bond Income Fund) with a combined net assets of more than $5 billion, according to the SEC.

Increased Scrutiny

The settlement is the latest evidence that the SEC is following through on its commitment to curb the practice of “greenwashing,” in which financial services institutions make unsupported claims about their approach to vetting investments based on ESG factors. Last month, the organization charged a Brazilian mining company with making false and misleading claims about the safety and environmental impact of its dams.

SEC’s Climate and ESG Task Force launched in March 2021 to analyze disclosure and compliance issues around advisers’ and funds’ ESG strategies. The agency named ESG investing as one of its priorities for this year, citing the risk that false or misleading disclosures could result in misinformed investors.

The SEC is not the only governmental watchdog taking a closer look at ESG claims. Last month, the Federal Trade Commission reached an agreement with Kohl’s and Walmart over claims that the retailers’ marketing inaccurately described the environmental impact of the production of “bamboo” items. In that case, Kohl’s and Walmart agreed to pay $2.5 million and $3 million, respectively.

While studies show that ESG investing has garnered capital from both institutional and individual  investors, defined contribution plans have been slower to incorporate such options into their plan menus.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

The 2021 PLANSPONSOR Defined Contribution Survey found that just 15% of plans included ESG funds on their investment menu. That share may grow amid strong participant demand. Schroder’s 2022 U.S. Retirement Survey found that nearly three-quarters of plan participants said they would or might increase their overall contribution rate if their plan offered ESG options.

«