For many Americans, an employer-sponsored retirement plan is the primary – if not the only – way they save for retirement. However, research from Hearts & Wallets finds these plans may not be providing older Americans with everything they need to be successful.
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The report, “What Older Americans Want From Workplace Investing: Ideas for Improving Advice & Income Products,” was based on data from Hearts & Wallets’ Investor Quantitative and Explore Qualitative databases.
The study found a high preference for rollovers from an employer plan into an IRA when workers retire. It also found that consumers who have a retail advisory account and a workplace account are much more likely to recommend their advisors to friends and family than those who have only a retail or only a workplace relationship.
Older workers aren’t well engaged with their workplace plans. The report notes that 43% of consumers over 55 said they don’t use retirement planning resources provided by their employers, or wouldn’t if they were offered, and 36% were neutral about using employer-provided resources.
In fact, of those who rely on a workplace plan as their primary source of advice, just 33% have a firm understanding of where their retirement income will come from when they stop working.
“The best solution is in-plan income combined with retail advice,” Laura Varas, CEO and founder of Hearts & Wallets, said in a statement. “Regulatory divisions, which lead to one-size-fits-all advice in the workplace, frustrate consumers, who want choices. Recent merger and acquisitions, such as Empower’s purchase of Personal Capital and the integration of Edelman and Financial Engines, are a smart way to prepare for what will hopefully become more integrated solutions in the future.”
Older Americans say they’re not getting the support they want regarding real estate, the potential for further work and tax optimization as priorities that aren’t being met by workplace plans. Consumers expressed a desire to have a pension-based retirement system, and the report found respondents who will get at least 25% of their retirement income from a pension were more confident than their peers. Lower housing costs had a similar effect on confidence.
“Older Americans surfaced the need for more advice on real estate, and it turns out they were right about this having a positive impact on financial well-being,” Amber Katris, a subject matter expert at Hearts & Wallets, said in the statement. “They want choices. And they are willing to pay more to get more. In-plan income will solve some shortcomings of retirement income plans, but other unmet needs in advice will need to be solved in the retail space for now.”
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Danielle Andrus works as an editor for The Financial Planning Association® (FPA®). Over the past 15 years, she has worked in various capacities, including writing and editing. Andrus has worked for several notable publications and outlets and spent more than seven years as the executive managing editor at ALM Media, publisher of Investment Advisor magazine and ThinkAdvisor.com. Before that, she was online editor for Summit Professional Networks, where she oversaw newsletter development for four magazines, including Benefits Selling, Senior Market Advisor, Boomer Market Advisor, and Bank Advisor.
