More than three-quarters of plan sponsors are confident that they’re providing sufficient retirement resources to support participants’ retirement readiness and well-being, but only 16% are confident it’ll do participants any good, according to research from Principal. Q1 data from the Principal Retirement Security Survey show that employers are concerned about their workers’ well-being.
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“The latest findings showcase employers’ continued dedication to supporting their employees’ retirement readiness, as well as their overall financial wellness. This is all while managing the challenges of running their businesses during a global pandemic and a market environment they remain cautious about,” Sri Reddy, Senior Vice President of Retirement and Income Solutions at Principal Financial Group, said in a statement.
The data show that sponsors have some concerns about how effective their retirement resources are among participants. Eight in 10 sponsors say that they’re encouraging younger employers to start saving for retirement, and that employees value the plan, but only 31% say employees are doing a good job preparing for retirement.
Although 77% of sponsors say they’re providing education and resources, just 37% could say their employees “have the knowledge to manage their retirement savings successfully.”
Gap in sponsor, participant confidence
Principal found that retirement plan participants have a much different view of their preparedness than sponsors. Over half of participants (52%) said they’re doing a good job preparing for retirement, compared with 31% of sponsors who agreed. Forty-six percent of employees said they’ll have enough saved for a comfortable retirement, compared to 16% of sponsors.
The biggest gap, though, was in perceptions of sponsors’ education. Seventy-seven percent of sponsors said they’re providing sufficient resources for a successful retirement, but only 45% of participants believe that to be true.
The survey found stark differences in workers’ perceptions of retirement and retirees’ realities, particularly about their ability to work in retirement (78% of workers say they will, compared to 23% of retirees who actually do). However, workers may be underestimating the resources that will be available to them in retirement. Less than a quarter of workers said they expect to have guaranteed income from an annuity in retirement, while half are counting on income from Social Security or a pension plan. Retirees reported high utilization of both sources of income, including 59% who get guaranteed income from an annuity and 83% who have income from Social Security or a pension.
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Financial wellness
Almost two-thirds of plan sponsors believe it’s important to measure their employees’ financial wellness, with 55% reporting that reducing financial stress is their top interest. Stress is high among workers and retirees, the survey found. Almost 60% of workers and half of retirees say they feel financially stressed.
New and current retirement plan participants were about as engaged in retirement planning as they were last year, the survey found, but 37% of sponsors would like to see participants saving more, and 31% said they have eligible employees who aren’t using the plan at all. More than a quarter would like participants to engage a financial professional to advise them on their retirement strategy.
That’s something more workers are amenable to, according to Principal. The survey found 37% of workers currently have an advisor and 28% plan to work with one in the future.
“Effective employee engagement can help workers prepare for retirement,” Reddy added. “In addition to financial wellness education, we actively encourage the adoption of auto features including plan reenrollment as well as retirement income solutions. Connecting workers with the right resources and plan features can help them recognize their options and feel more secure about their path forward.”
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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.
