Data & Research January 12, 2016

Savings Rates in Retirement Plans Have Increased

Loans are on the decline, PSCA says.
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Participants are saving more in their retirement plans than they were two years ago, according to the Plan Sponsor Council of America’s (PSCA) 58th Annual Survey. Lower-paid employees are contributing an average of 5.8% of their salaries, up from 5.3% in 2013; this is higher than it was prior to the steep market crash in 2008.

While there was an increased use of plan loans in 2008, the percentage of participants with loans and the percentage of loan assets have been decreasing and have reached their lowest rates in more than a decade, PSCA said. Slightly less than 15% (14.6%) of participants have an outstanding loan, and only 0.7% of all plan assets are held in loans.

The survey also found that 99% of all full-time employees are eligible to participate in their plan, and half of plans allow part-time employees to participate. Eighty percent of workers participate in their plans, and 88% of eligible participants have an account balance. Sixty-two percent of plans allow Roth contributions.

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One-quarter of plans suggest a targeted deferral rate to participants. Of those that do, half suggest a rate higher than 6%. Just more than half (52.4%) of all plans use automatic enrollment, and this jumps to 70% among large plans with 5,000 or more participants. Twenty percent of all plans use mobile technology to communicate with participants; among large plans, this increases to 30%.

“The increase in savings rates by participants and the steady plan participation rates demonstrate that participants value their company’s retirement plan,” says Hattie Greenan, director of research and communications for PSCA. “The fact that loan usage has decreased while savings rates increased indicate that education about how plans and markets work is working.”

Information about how to purchase the full survey is available here.

Data & Research January 12, 2016

He Said, She Said in Financial Decisions

Women more often take an equitable view of financial decisionmaking than men.
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Who is really making financial decisions? 

Similar to studies that find women and men differ when it comes to investing styles, research from LIMRA Secure Retirement Institute reveals that two-thirds of women (67%) age 50 and older say they split financial decisions with their spouses, while fewer than half of men (46%) admit to sharing decisions. 

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In households with more than $1 million in net worth, only 30% of women are the primary financial decisionmakers. The study also found that when women are the primary decisionmakers, they are as likely or more likely to have completed many retirement-planning activities, compared with men.

For both women and men who are primary decision makers, one-quarter have a formal retirement income plan. Women are more likely to have determined what their income will be, how long their assets will last and developed a specific plan for generating retirement income from their savings.

An important takeaway: LIMRA finds that advisers who help their clients with retirement income planning have greater client satisfaction and loyalty. Nearly half of clients (42%) with a plan trust their advisers and the advice they provide—three times more than those clients without a plan.

Yet many couples disagree about their desired lifestyles in retirement. According to an Allianz Life Insurance study, 70% of women switch advisers following the death of their spouse, which is echoed in other studies. Therefore, it is important to involve both spouses in the financial decisions, which will foster a stronger relationship with both spouses.  

Other findings from LIMRA:

  • 76% of women have determined Social Security benefits, vs. 73% of men;
  • 60% of men have calculated the amount of assets and investments available to spend, vs. 44% of women; and
  • 41% of women have developed a specific strategy for generating income from savings, vs. 34% of men.

A link to LIMRA’s graphic on planning activities completed by men and women can be accessed on their website.

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