Retirement confidence among retirement plan participants is better than expected, and while plenty of workers had to dip into savings during the pandemic, not many had to raid their 401ks.
These are among the key findings from the latest DC plan participant survey, “Inside the Minds of Plan Participants,” which was recently released by the Defined Contribution team at AllianceBernstein.
The survey aims to help plan sponsors understand how to lead participants to better savings outcomes and more comfortable, confident retirements. The survey offers telling insights about what participants are doing well, where they are falling short and what they want from their DC plans in the future.
Although workers feel less optimistic than pre-pandemic about their financial readiness for retirement, from a longer-term perspective confidence is better than expected. In 2021, 35% of workers said they feel “confident” or “very confident” that they will have a comfortable retirement, and another 41% report feeling “somewhat confident.” While that is down from pre-pandemic 2018 results (when 47% felt confident or very confident), it’s worth noting that the last time it was even over 40% was in 2007, just before the global financial crisis.
“So this year’s 35% feeling pretty confident looks … pretty good, considering the debilitating economic impact of the pandemic,” the report states.
It also registers notably higher than the 29% average level of good confidence over the 16 years AllianceBernstein has canvassed retirement plan participants.
Also notable is that 23% of respondents said they were “not very” or “not at all confident” that they will have a comfortable retirement. The key reasons behind this sentiment? Forty-three percent of workers feel not getting enough money from Social Security is a key reason for their lack of retirement confidence, and 42% said they don’t have enough savings.
Surprisingly over 70% said the pandemic has not affected their retirement savings or how and why they plan on retiring
When asked whether the pandemic was specifically affecting their abilities to save for retirement, surprisingly over 70% said the pandemic has not affected their retirement savings or how and why they plan on retiring.
Still, 27% said they have dipped into emergency savings to pay for living expenses during the pandemic and 17% had tapped into retirement savings, either by loan or withdrawal, to pay for living expenses.
In addition, the past few years brought other social and environmental concerns that might play a role in workers overall well-being, as 27% of workers felt the current political environment substantially lowered their confidence in being able to reach a comfortable retirement.
More key findings
• How much is enough? While almost 60% of respondents said they want a nest egg of a half-million dollars or more to feel comfortable in retirement, only 14% of them currently have that much in their retirement savings accounts. This underscores a core issue for DC plan sponsors: how to close the retirement savings gap between what participants need and what they currently do to get there.
• ESG importance: Two-thirds of plan sponsors noted their participants want more investment choices with a responsible investing tilt, and when participants were asked how important it is to have investment options within their workplace retirement savings plan that adhere to their core ethical values, 83% said it was somewhat or very important. Notable here is that younger employees decisively want to have their investments aligned with their core ethical values. “In other words, the next wave of employees are putting employers on notice that they definitely want their investment dollars deployed in favor of an ethical, more responsible future,” the report states.
• Good news on quality of life in retirement: The survey asked 200 retirees between the ages of 65-75 about their quality of life in retirement, and found a surprising 80% say it was either about what they expected or exceeds expectations. In fact, 10% said it far exceeds expectations. Only 17% said their quality of life in retirement falls somewhat short of expectations.
• Views on retirement income: The next wave of retirees do not feel so optimistic about their prospects and many don’t have any idea how much they can withdraw annually from their savings. They definitely want guaranteed retirement income but aren’t too keen on the usual guaranteed products, the study found. When respondents aged 55-75 were asked what they intend to do with their DC plan assets when they retire, 5% said they would take a lump-sum distribution while 19% haven’t even started thinking about it yet.
The 24-page report goes into far more detail on these and additional topics. Access the complete survey report here.
SEE ALSO:
• AllianceBernstein’s Lifetime Income Strategy Tops $5 Billion Milestone
• ESG Investments Will Skyrocket by 2030: Report
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
