Data & Research September 19, 2012

Workers Welcome Automated Retirement Solutions

With defined contribution (DC) plans playing a growing role in retirement savings, one increasingly prevalent savings tool will be the target-date fund (TDF), BlackRock found.
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A survey from the asset manager BlackRock found more than nine in 10 workers find the TDF concept appealing—and one-third find it very appealing.  Younger workers, ages 25 to 34, are even more likely to find the concept very appealing (44%) than workers ages 55 to 59 (29%).  

More than six in 10 workers say they would react positively if their employer automatically moved their retirement assets into a TDF, and about the same number of retirees indicate an identical reaction.   

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Many workers would be comfortable with an employer taking “automatic” support for savings even further: Nearly four in 10 say they would be willing to have an employer automatically increase annually the amount of retirement savings deducted from a paycheck. A similar percentage of retirees indicate they would have been comfortable with their employer taking this step during their working years.  

According to Chip Castille, managing director and head of BlackRock’s U.S. and Canada defined contribution group, DC plan sponsors need to recognize that target-date funds have varying objectives and investment approaches that can affect investment performance as well as a fund’s suitability for a particular participant population. “Proper due diligence aligned with [a] good understanding of plan and participant realities can help a sponsor ensure that their target-date fund well supports their employees’ essential savings objectives,” he said.  

Boston Research Group conducted surveys of 1,035 retirees and 1,002 workers during March 2012 on behalf of BlackRock’s U.S. Defined Contribution business. Findings from the BlackRock survey can be found at http://www.BlackRock.com/RetirementSurvey.

 

Data & Research September 19, 2012

Long-Term Plan Participation Improves Retirement Readiness

American workers are not saving enough for retirement—and risk the regret felt by current retirees who made that mistake, according to research from BlackRock.
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When the asset manager BlackRock surveyed 1,035 retirees and 1,002 workers in March about key attitudes and behaviors around retirement, the polls revealed that, in many ways, the reality of retired life is beating expectations and that, for many retirees, long-term participation in a defined contribution (DC) plan such as a 401(k) helps sustain critical aspects of retirement security and satisfaction.   

Nearly six in 10 workers (58%) currently are not saving the maximum amount of money permitted by their 401(k) plan. At the same time, nearly three in 10 retirees (27%) agree they did not save as much in their plan as they could have — and nearly eight in 10 of them regret it.  

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Long-term participation in a DC plan can significantly affect retirement savings, the BlackRock poll shows. Among retirees, those who spent more than 20 years in the DC system are more likely than those with less time (five to 10 years) to say that they saved the amount of money permitted annually by their plan (79% versus 62%).   

“The positive impact that DC has on retirement saving builds over time,” said Chip Castille, managing director and head of BlackRock’s U.S. and Canada defined contribution group. “We need to get workers into the DC system as soon as possible and maintain their maximum participation throughout their working years.”

 

 

(Cont...)

The polls show that many of today’s retirees are successfully meeting the financial challenges of life post-employment. More than half (51%) of retirees are confident about having enough money to live comfortably in retirement, and four in 10 say they are somewhat confident they can make ends meet in retirement.  

About eight in 10 retirees polled report having pension income, but defined benefit (DB) plans cover just 53% of the workers polled.   

Only one-quarter of current workers are confident about having enough money to live comfortably in retirement, and just 14% are very confident that they are presently saving enough to get the monthly income they want in retirement. Despite this, nearly half of workers strongly agree that their plan provides an easy way to save; 46% strongly agree that their plan offers an incentive to save via the company match.  

When it comes to the retirement savings exercise, as well as planning for retirement in general, 92% of workers believe they have something to learn from the experiences of today’s retirees. Many retirees practiced good “planning behaviors” when working, but a number of them did make some mistakes along the way, particularly in the area of saving. Nearly one in three retirees say they did not make a financial plan for retirement savings early enough in their work life and, of those, about eight of 10 regret it (32% call it a major regret).  

Findings from the BlackRock survey are online.

 

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