After the recent cold winter, much of the country is looking
to unthaw and finalize travel plans for spring break, says online travel
company Orbitz in a survey.
Two facts
of contemporary life—parents who are increasingly tethered to their workplace,
and children increasingly glued to personal devices—also drive families to seek
a vacation that will allow everyone to reconnect.
“Over the past
15 years, the advent of new communication technologies has caused a decline in real
connections within families,” says Jeanine Turner, associate professor of
communication, culture and technology at Georgetown University.
But it’s not
enough to simply get on an airplane and check into a hotel together, Turner
says. Even though vacations can be a wonderful
way to unplug and bond with one another, just sharing
physical space is not the same as connecting. “The critical thing is to share
an activity together that creates a memory of experiences,” she points out.
Orbitz identified several categories of
activities families want to experience together to enrich their overall holiday
to provide quality family time and get the most from their travel experience. If
budget weren’t a factor, more than a third of families (36%) surveyed about
their ideal getaway said a vacation centered around a water activity, such as
swimming with dolphins, would be ideal. Slightly less than a third (30%) would
plan a cultural activity to learn about the history of an area.
More than one in five
(22%) would plan an educational activity,
such as a tour of NASA. Learning a new sport was at the bottom of the list, chosen
by fewer than one in 10 (8%).
Mexico’s
Yucatan Peninsula took three spots on the top 10 list of spring destinations with Cancun, Riviera Maya and Playa Del Carmen. Further down, New York City was also
cited. The top destinations for spring break for all travelers, along with
average hotel cost, are:
Las
Vegas, Nevada ($115 a night)
Cancun,
Mexico ($267)
Punta
Cana, Dominican Republic ($306)
Orlando,
Florida ($125)
Riviera
Maya, Mexico ($339)
Playa Del
Carmen, Mexico ($311)
Honolulu,
Hawaii ($212)
New York,
New York ($294)
New
Orleans, Louisiana ($239
Puerto
Vallarta, Mexico ($190)
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Since the Department of Labor (DOL) proposed
including lifetime income illustrations on retirement plan participant
statements, no doubt most in the industry have assumed the information would
come as a shock to participants.
“We have all been saying, ‘Just wait until participants
see this on their statement; jaws will drop, it will be a wake-up call.’ You
know the DOL thought that,” says Nevin Adams, director of education and
external relations at the Employee Benefit Research Institute (EBRI). “While
some providers have already started providing this information and seeing some
positive results in the form of increased savings, I’ve seen no survey showing
what participants think.”
Until now, that is. As part of EBRI’s 2014 Retirement
Confidence Survey (RCS) (see “Retirement
Plan Offering Strongly Linked to Confidence”), participants were asked
how much money they currently have saved in their employer-sponsored plan in
total, how much money in total they and their employers currently contribute to
the plan annually, and their expected retirement age. Using the data given by
respondents, the monthly income available at their stated retirement age was
estimated based on the methodology described in the DOL’s Advanced Notice of
Proposed Rulemaking (ANPRM) about lifetime illustrations (see “DOL
Seeks Comments About Lifetime Income Data”), using the safe harbor
assumptions and a few modifications. More than half (58%) thought the amount
calculated was about what they had expected.
According to the report “How Would Defined Contribution
Participants React to Lifetime Income Illustrations? Evidence from the 2014
Retirement Confidence Survey,” authored by Jack VanDerhei, EBRI research
director, only 8% of the respondents indicated the monthly amount was much less
than expected, though nearly one in five (19%) replied that it was somewhat
less than expected. Another 7% replied that it was somewhat more than expected,
and 5% said it was much more than expected.
A total of 81% of the respondents indicated they would
continue to contribute at their current rates after hearing the projected
monthly income amount, while 17% replied that this information would lead them
to increase the amount they were contributing.
So,
does the lack of surprise by participants mean the retirement “crisis” is not
as bad as we think? Are participants more prepared than media reports and other
surveys suggest?
“I admit when I first ran the numbers I was surprised that’s
how many that said that’s what they were expecting, and such a small number
said they would change their contributions,” VanDerhei tells PLANADVISER. “But,
keep in mind some folks’ providers are already providing projections; that
might go a long way to explaining that 58%.”
“The fact that it’s what was expected doesn’t mean it’s
enough,” Adams adds, noting that the survey only gauged participant reaction to
the projection, not that the projection calculated is enough to live on in
retirement. He notes that the survey found people with retirement plan accounts
were less surprised than people without retirement plan accounts.
In addition, the survey found while 18% of those in the
lowest-income quartile, when ranked by the value of illustrated monthly income,
thought the value was much less than expected, only 12% of those in the second
quartile had a similar assessment. The weighted percentage of respondents that
thought the illustrated values were much lower than expected were even smaller
for those with larger monthly illustrations, at 3% for those in the third
quartile and 1% for those in the highest-income quartile.
While 13% of those with household incomes of less than
$60,000 thought the value was much less than expected, 10% of those with
household incomes between $60,000 and $99,999 had a similar assessment. The
weighted percentage of respondents that thought the illustrated value was much
lower than expected was only 4% for those with household incomes of $100,000 or
more.
Eleven percent of the respondents indicating they expect to
retire at or before the median age of 65 thought the value was much less than
expected, while only 6% of those expecting to retire after age 65 had a similar
assessment.
There
are still things not known about the participants overall situation, “but this
is a good national sampling with consistent calculations based on the numbers
participants provided,” Adams notes.
Adams notes that it makes sense since most were not
surprised by the estimate, most would not change anything, but a greater
proportion of those who were surprised by the calculation said they will change
their savings. Of those responding that their illustrated value was much less
or somewhat less than expected, 35% indicated they would increase their
contributions. Of those indicating they would increase contributions, 69%
thought they would increase the dollar amount by 10%, while another 13% said
they would increase it by about 25%. Three percent indicated they would
increase it by 50%, while another 8% thought they would double it. Seven
percent did not know how much they would increase their contributions.
In addition, the vast majority of respondents said the
retirement income projection was useful; more than one in three respondents
(36%) thought it was very useful to hear an estimate of the monthly retirement
income they might expect from their plan, and another 49% thought it was
somewhat useful. Only 5% thought it was not too useful, and 10% thought it was
not useful at all.
A total of 90% of those whose illustrated values were lower
than expected found the estimates somewhat or very useful, and nearly as many
(86%) of those whose values were equal to what they expected also found the
estimates somewhat or very useful. A somewhat lower proportion (79%) of those
with illustrated values higher than expected found the estimates somewhat or
very useful.
“The RCS shows lifetime income illustrations will serve as a
wake-up call to some participants and will spur positive action, so they’ll
serve the purpose of the DOL intentions. Even people who said they were not
surprised by the estimate still find it useful, so why not give participants
this additional perspective?” Adams concludes.
“How
Would Defined Contribution Participants React to Lifetime Income Illustrations?
Evidence from the 2014 Retirement Confidence Survey” is in the March edition of
the EBRI Notes at www.ebri.org.