Data & Research July 12, 2011

Uncertainty Makes It Hard to Plan for Retirement

Shifting and uncertain retirement dates are becoming the norm in the American workforce, making it harder for employees to establish meaningful financial plans, recent MetLife research indicates.
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According to the company’s 9th annual Employee Benefits Trends Study, four out of ten employees have changed their predicted retirement date since last year, and 30% raised their expected retirement age. Furthermore, this trepidation about hitting retirement goals could be accelerating; 59% of workers in the study expect to work beyond age 65, compared with 52% one year ago.  

Given these indistinct targets, many employees lack confidence in their ability to prepare for the culmination of their working years, with only 39% feeling assured about managing the funds in their employer-sponsored retirement plan, according to the survey findings.

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More than half (54%) of workers have not calculated how much annual household income they will need in their retirement. Of those that have not done calculations, 29% don’t understand how to undertake this task. Forty-four percent of employees do not know how many years they have planned for retirement, and only one in five feels confident they know how much annual income they will receive from their retirement savings.

Because they don’t have a handle on their financial needs in retirement, many employees feel unprepared and unsure about their savings efforts, and more than half (52%) are behind where they had hoped to be in building up retirement savings. The same percentage is concerned about outliving their retirement money, and even more (54%) are worried about having enough steady income during retirement to cover costs of medical insurance and/or out of pocket medical costs.  

“There are additional ways employers can help employees,” noted Michael K. Farrell, executive vice president, Distribution, for MetLife. “Almost half of employees are interested in their employer automatically enrolling them in a savings program, such as a 401(k), 403(b) or 457. Over 60% believes it would be very helpful if their organization provided a statement that shows how much income the employee’s savings would provide in retirement, and 45% would like their employer to offer an annuity as part of their 401(k) or similar plan. Offerings at work such as these can have a strong influence on employees’ preparedness for retirement.”

Data & Research July 12, 2011

Fiduciary Support Not a Focus in Provider Search

Although regulatory changes to fiduciary responsibilities and disclosures loom on the horizon, plan sponsors of all sizes say that strong fiduciary support services falls low on the list of factors that influence their choice of plan providers.
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Retirement Planscape 2011, a new study by Cogent Research, shows fiduciary support services is ranked 12th overall, being lowest among micro plans (those who oversee plans with less than $5 million in assets) where only 9% say it matters.  

According to a release about the survey of a representative survey of 1,600 DC plan sponsors across all plan sizes and industries, in terms of which companies have done a good job associating their brand with providing strong fiduciary support services among micro plan sponsors, firms like Ascensus (33%), Principal (30%), and The Standard (25%) match, or in some cases even outpace, dominant players like Vanguard, T. Rowe, and even Fidelity. However, it is worth noting that no one provider is seen as being strong in this area among a majority of micro plan sponsors, Cogent said.  

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In the mega market ($500 million or more), a different set of providers emerges as being strong on fiduciary support services, including industry leaders Vanguard (51%) and Fidelity Investments (47%) which far outpace all other providers. T. Rowe Price (31%), Hewitt (27%) and Charles Schwab (25%) – although somewhat far behind – make very good showings in the area as well. Beyond those five plan providers, no one provider garners more than a 20% share in the mega market.
 
“Plan providers have an opportunity to educate plan sponsors in the smaller end of the market about the scope of the regulatory changes, as well as to differentiate themselves by demonstrating their expertise in the area of fiduciary support,” said Linda York, Senior Product Director at Cogent Research, in the press release.
 

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