New research from Morningstar makes the case for managed accounts as a soluble retirement planning strategy.
The study looked at the savings strategies and investment decisions of 84,000 retirement plan participants who utilize Morningstar Managed Accounts service and found that 73% of participants were off track in their retirement savings before using managed accounts. After enrolling, 65% of those who were off course raised their savings rate by an average of 2% of their salary and saw a 43% increase in retirement wealth when utilizing the investments.
Further, Morningstar added that among the 27% of participants on track for retirement, 42% boosted their savings after enrolling in managed accounts, thereby increasing deferral rates by 12%, or 1% of their salary. For participants who were not on track, deferral rates grew by 33%.
“We believe that managed accounts can have a tremendous impact on the everyday investor who may not be aware that they are off track and/or are unable or unwilling to hire a personal financial advisor,” wrote Tao Guo, director or Retirement Research and Rajneesh Motay, head of Advice and Financial Planning at Morningstar, who also co-authored the report. “As such, managed accounts may continue to bring value to today’s retirement advice landscape.”
Managed accounts have substantially risen in popularity and growth over the past years. Reports have described the tool as a rising trend in the retirement planning industry, as the accounts realize further growth among participants. 2023 research from Vanguard showed that usage of professionally managed allocations increased by 40% compared to 2013.
Managed account investors are also likelier to feel more confident in their investment strategy compared to other users, reported later findings from Cerulli Associates. Forty-seven percent of defined contribution (DC) managed account program users reported feeling “very confident” in their retirement strategy, compared to 16% of non-users who felt the same.
SEE ALSO:
SECURE 2.0, Managed Accounts, and More: Top 2024 Trends
ETFs, Managed Accounts Grew Rapidly in 2023
Underutilized 401(k) Managed Accounts Breed Much Higher Retirement Confidence for Users