More than a year into the recovery from the worldwide pandemic, market risk, and longevity risk are still the top concerns for American workers, according to new research from American Century Investments. Moreover, not saving enough was the top regret, especially for those with less in savings.
“Market risk and longevity risk continue to be the top concerns for retirement plan participants,” said American Century Senior Retirement Strategist Glenn Dial. “This may explain why, when it comes to taking withdrawals, 76 percent would be more likely to leave their money in their 401k plan if given an in-plan withdrawal solution.”
Additionally, employees continue to express considerable regret about not saving more or starting earlier but are now counting on employers to help. Two-thirds prefer an employer match over a salary increase, regardless of percentage. Other findings include:
- 90% say their retirement plan is a top benefit.
- Two-thirds support auto-enroll at 6%.
- Eight out of 10 would rather have a retirement contribution than help with education costs.
- Four in 10 workers want a “kick in the pants” or a “slight nudge” to save from employers, though Boomers are more likely than Millennials and Gen Xers to want to be left alone.
According to Dial, employees want employers to help with progressive plan design to set them up for success.
Workers are also concerned about how to retire with only six out of 10 knowing how long to make their money last in retirement and approximately 70% needing a “little bit of guidance” on how to withdraw money from their retirement accounts.
The good news, said Dial, is that three out of every four workers show at least some interest in holistic financial advice, which could have important implications for financial professionals.
Interest in ESG remains high
Workers’ interest in environmental, social, and corporate governance (ESG), more than half expressed an interest in having ESG investments as part of their retirement plan. Millennials and Gen Xers are most interested and participants with incomes of at least $100,000 also are interested. Unsurprisingly, ESG is more attractive if investment performance is comparable, with 65 percent interested in that case, versus only six percent interested even if performance is worse.
Expectations, worries, and regrets
Some three in 10 workers expect a better standard of living in retirement, yet four in 10 worry about running out of money. Many admit to saving less, particularly during their first five years of working, with six in 10 stating they saved less than they should have.
Not saving more continues to be participants’ biggest life regret, according to Dial. “We found that 35 percent of workers voiced this regret, which was more important to them than doing better in their career, doing better in personal relationships, or even doing enough to enjoy life. This clearly speaks to concerns about being ready for retirement.”
On the upside, four in 10 Baby Boomers and 3 in 10 Generation X and Millennials have advisors who could help them plan for retirement.
Impact of the pandemic
After an unprecedented pandemic year, participants are now more optimistic about saving, risk, and expectations for the future. Participants gave themselves higher grades on saving for retirement this year (an average of B-) versus 2020 (C+) and 2019 (C-). While thinking about their future in retirement, men tended to be more excited about pursuing hobbies; women were more excited about travel. Additionally, paying off debts of all kinds, including longer-term credit cards and student loans, is a lower priority this year than last.
Risk concerns diminished somewhat from 2020. Worries about outliving retirement savings fell five percent (58 percent in 2021 versus 63 percent the previous year); inflation and interest rate risk concerns decreased four percent; market risk worries went down 10 percent, as did concerns about growth.
“In short, we saw that investing for retirement is a priority for participants regardless of age, that employers are having a positive impact on accumulating assets, workers are now looking for help in withdrawing assets and that optimism is on the rise,” Dial said.
Lynn Brackpool Giles is a contributing editor to 401(k) Specialist. Giles is a former Managing Director of Communications and Consumer Services for the Financial Planning Association (FPA), where she oversaw all corporate, legislative, and consumer communications. In her current journalistic practice, she is a frequent contributor to numerous financial services industry publications.
