A survey by Natixis highlights what plan participants want for their retirement, finding that many are in favor of environmental, social, and governance (ESG) investments.
According to the research, 73% of those surveyed said they would begin to participate or increase contributions if their plan offered investments in companies with good ESG practices. Additionally, 83% believe companies who focus on sustainable business practices present significant growth opportunities for their investments. This was particularly true for Millennial workers, as 91% were more likely to share this belief, and 88% saw access to investments as an incentive to save for retirement.
“There’s a really powerful belief among this generation that companies with good sustainable practices are going to perform better for them,” said Dave Goodsell, executive director of the Natixis Center for Investor Insight, in an interview with 401(k) Specialist. “They see it as really an economic approach to investing rather than just a values-based approach.”
Gen Xers and Baby Boomers were also receptive to sustainable options in their retirement plans. Seventy-two percent of Gen Xers said having access to ESG investments was an incentive to save, as did 49% of Boomers. Seventy-eight percent of those in Generation X saw growth opportunities with ESG, along with 74% of Boomers.
Yet, another data point in the survey saw 22% of Gen Xers say they don’t care about ESG issues at all, along with 41% of Boomers.
The research also showed that participants think differently about E, S, and G factors, said Natixis in its research. One-third (34%) if respondents said they care about environmental issues when selecting investments in their company-sponsored retirement plan. This includes more than four in ten Millennials (42%) and just 21% of Boomers. Almost the same overall number (32%) said they care about social factors when selecting investments. This included 38% of Millennials, 33% of Gen X, and 20% of Boomers.
Fewer individuals said they cared about corporate governance issues, including only 32% of Millennials and just 23% for Gen X and Boomers. “Folks are less aware of governance as it’s easier to get your head around things like environmental and social issues, explained Goodsell. “That tends to be what we see in our investor surveys as well as around the world, individuals get those pieces but maybe don’t match to governance.”
Millennials unprepared for retirement
The 362 Millennials surveyed by Natixis said they plan to retire at age 60, with an average of only $891,000 to fund a 25-year retirement. This was a stark contrast to Gen Xers and Baby Boomers, who believe they’ll need $1.2 million and $1.1 million to retire, respectively.
Even as workers believe they’ll need multiple streams of income to retire, including personal savings, individual retirement accounts (IRA), home equity, and more, sentiment surrounding Social Security is bleak for Millennials, finds Natixis. Nine out of ten Boomers say Social Security will factor into their income plans, as do two-thirds (66%) of Generation X. Less than half of Millennials (46%) agree. Another notable gap can be seen between those over age 50 (86%) and those under 50 (51%) who anticipate Social Security will be part of their income plans.
“What we see with Millennials is if you look at their views on Social Security, that’s a key indicator of how stressed they are about retirement,” added Goodsell. “They are poised well but they recognize that it’s going to take a lot to get [to retirement]. The one fault we might be forgetting is that their underestimating how much they need. They might want to revisit the math and maybe they need to think how far that goal goes.”
Actions for plan sponsors
While employers have new tools at their disposal to enact—including new provisions brought on by SECURE 2.0 like emergency savings features and catch-up contributions—at times, it just boils down to meeting participant preferences, says Natixis.
For example, adding sustainable investments can help address the preferences of individuals eligible for plan participation. Still, Natixis underscores the importance of understanding fiduciary responsibilities when considering relevant risk and return factors. This also includes access to private equity, hedge funds, and cryptocurrencies.
“You’re still a fiduciary, so you have to weigh in on what’s an appropriate investment risk and what isn’t in a retirement account,” concluded Goodsell.
SEE ALSO:
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- One in Five Americans Will Achieve $1.1 Million for Retirement Savings
- Over 80% of Americans Halted or Withdrew from Retirement Savings in 2022
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.
