Participants would rather opt into in-plan retirement income features versus out-of-plan guaranteed income options, finds new data from Invesco’s latest 2024 Defined Contribution (DC) Participant Pulse survey.
The findings show that 54% of survey participants would feel better about keeping money in their employer’s plan after retiring, so long as they obtain access to a monthly payout feature. Furthermore, when asked to choose between receiving messaging about flexibility or a built-in guarantee of a target-date fund (TDF), 67% say they prefer communications about flexibility.
While they value the idea of a guaranteed income option, many are satisfied with just allotting a share of their retirement assets to income products. Thirty-three percent of respondents said they would be happy with a built-in retirement income feature that automatically builds guaranteed income starting at age 50.
“Solutions that emphasize optionality, flexibility, and agility tend to be perceived as more impactful than those with a built-in or guaranteed income option,” wrote Invesco in its research.
The findings reiterate the fact that participants want a say in their investment preferences, yet workers say their employers have failed to get the appropriate messaging across. A past 2021 Invesco survey of 100 plan sponsors found that 78% say they’ve provided communications and/or education about retirement income options, yet findings from the latest survey show that 57% of employees do not recall receiving any messaging.
Furthermore, 60% of Baby Boomers and Gen X respondents—groups nearing retirement that could benefit the most from annuity options—said they have not received any materials about the topic.
Invesco notes that while plan sponsors may be providing communications about retirement income, the topic could be getting lost among other critical subjects. The issue underlines the relevancy in working with plan professionals, the findings suggest.
“Thus, it is important that plan sponsors review participant messaging and engagement metrics with plan providers and consider creating specific “income-focused” campaigns, in particular targeting older participants,” writes Invesco.
Language also matters when communicating the features that encompass a plan. For example, participants in Invesco’s survey increasingly preferred lower fees over hard-to-access investments. Participants were also likelier to respond more positively with words like “cost-efficient,” “financial security,” “risk reduction path,” and “investment income,” rather than “low cost,” “financial freedom,” “glide path,” and “nest egg.”
Invesco surveyed 583 actively contributing U.S. defined contribution (DC) plan participants who have been employed for over one year at a company with over 1,000 employees. Participants did not work in education, financial services, the federal government, and were not involved in the management of or decisions regarding employer’s retirement plans.
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
