Good news—401k participants got the message and maintained their behavior during the pandemic, with nearly four in five respondents leaving their contributions or investments untouched and in place.
Bad news—more than half feel like they’re overloaded with information and don’t know where to start planning for retirement.
J.P. Morgan Asset Management is out with its 2021 Defined Contribution Plan Participant Survey. It finds that an increasing number of participants wish they could push a button and completely hand over retirement planning (don’t we all?). Plan sponsors and their advisors should feel confident in incorporating proactive investment features to help increase the odds that participants will be able to meet their retirement funding goals.
“It was pleasing to see that while the COVID-19 pandemic disrupted financial markets, workplace trends, and spending patterns, participants remained broadly resilient in sticking to their savings plan,” Meghan Jacobson, Head of U.S. Insights at J.P. Morgan Asset Management, said in a statement. “At the same time, however, the overarching theme of this year’s research is that participants want more help with investments, contributions, and post-retirement income, so employers and advisors should feel empowered to offer features such auto-enrollment and re-enrollment in target-date funds to place participants on a more secure retirement savings path.”
Several other key trends emerged from the survey:
Participants think they should save more
Participants know that they should be saving more for retirement—they just are not doing it. While three in four survey respondents believe they should be contributing at least 10% of their salary in order to be financially secure in retirement, 65% say they have not contributed the amount they believe they should in the past year.
Emergency savings are top of mind
When asked to allocate $500 into different savings vehicles, participants allocated to:
- Their retirement savings account ($197.80),
- An emergency savings account ($134.10),
- A program to help pay down debt ($72.90),
- An HSA ($60.80),
- A transportation savings account ($34.40).
More are being auto-enrolled and auto-escalated
Participants’ favorable/neutral views of auto-enrollment and automatic escalation continue to rise, climbing to 87% this year. Four in 10 survey respondents were automatically enrolled into their current plan, up more than 50% from 2016.
Participants want employers to help save for retirement
Nearly nine out of 10 survey respondents identify retirement benefits as an important factor when deciding to stay with their current employers or consider a new employment opportunity. Similarly, 92% ranked their retirement plan benefits as ‘extremely’ or ‘very’ important for improving their financial wellness, followed by health insurance and PTO/vacation/sick leave at 90% and 89%, respectively.
Most participants also want help with financial wellness
Nearly seven out of 10 participants believe that their employer has a responsibility to help employees with their financial wellness—this is an even stronger belief for participants under age 30 (80%).
Notable variability in when and how participants retire
On average, surveyed participants expect to retire at 65. Digging beneath that average, however, shows how highly personal the retirement journey can be for each individual, with 24% expecting to retire at age 64 or younger, 34% at age 66 or older, and 19% not sure.
Most are concerned about outliving their assets
Nearly seven out of 10 respondents (69%) are concerned about outliving their money in retirement. Less than half (47%) have calculated how much money they need to accumulate to last throughout retirement, and one-third (33%) are not confident about how to estimate how much they will have in their plan when they retire if they continue saving at the same level.
Many would welcome a post-retirement income option
A large majority of respondents (85%) say that they would likely leave their balances in their plans post-retirement if there was an option to help generate monthly retirement income. This figure grows even higher for younger participants (91% for ages 30-49, 86% for under age 30).