There’s a lot to unpack from the new “State of the Industry” survey released by Ubiquity Retirement + Savings this week—including the finding that nearly 6 in 10 401(k) plan participants say they are not currently saving enough, despite over one-third (34.2%) of them ranking “saving enough money” as their top concern for retirement.
“It’s interesting that plan participants’ desire to save enough to last in retirement does not equate to any expected changes to contribution rates across the board”
Ubiquity’s Chad Parks
That sentiment also extended to solo 401(k) users, with 35.7% saying “saving enough” is a top concern.
Despite this obvious worry, 7 in 10 participants (69.2%) surveyed and 60% of solo 401(k) users said they expect to make no changes to their 401(k) contribution rates.
Further, three-quarters of plan participants say they will make little to no change to their risk tolerance while only about half (52.5%) of solo 401(k) users will make little to no change to their risk appetite.
“It’s interesting that plan participants’ desire to save enough to last in retirement does not equate to any expected changes to contribution rates across the board,” said Chad Parks, Founder and CEO of San Francisco-based small business plan provider Ubiquity. “Instead, plan participants are increasingly looking to employers to offer a retirement benefit to fuel their saving power. In addition, 28.7% of participants voted annuities as the top product they would like to see from us in the future, underscoring that savers are serious about building a lasting nest egg able to support a secure retirement.”
Ubiquity’s first “State of the Industry” independent survey reveals rising inflation, an impending recession, and poor investment returns rank as top concerns among survey respondents. Inflation concerns are top of mind for 54.8% of plan participants and 58.1% of solo 401(k) users. An impending recession is a major stressor for 50.2% of plan participants and 58.1% of solo 401(k) users. Poor returns on investments ranked as the third concern among plan participant respondents at 48.7% and 55.8% for solo 401(k) users.
The survey queried financial advisors, retirement plan sponsors, participants, and solo 401(k) users about their top concerns for the performance of 401(k) plans in 2023. Polling a collective 1,100 clients across the country in Q4 2022, results highlight a range of proprietary data that unveils the current state of the retirement industry from multiple perspectives.
“As we enter into a period of heightened economic turbulence, it’s crucial for retirement plan sponsors, participants, and small business owners to take a close look at their 401(k) plans in order to ensure they are well-positioned in 2023,” Parks added. “Our survey shows that there is reasonable concern among industry professionals and the clients they serve about retirement security in America.”
Advisor and plan sponsor findings
Participating advisors and plan sponsors aren’t expecting plan participants to do much about their acknowledged lack of saving, either. The survey found 72% of financial advisors and 70.3% of plan sponsors expect little to no change in participant 401(k) contributions in 2023.
When it comes to overall risk appetite, 58% of financial advisors and 50.6% of plan sponsors expect clients to have little to no change.
But advisors and plan sponsors agree offering a 401(k) is helpful when it comes to attracting and retaining workers, with 86.7% of plan sponsors and 82.1% of financial advisors saying as much.
Crypto places dead last
The “State of the Industry” survey also polled 558 plan participants about their preferred retirement asset options for 2023. After its dismal 2022, it’s no big surprise cryptocurrency ranked dead last.
The survey found that only 3.5% of respondents selected crypto as one of their preferred retirement savings asset classes, ranking last among the offerings for investors.
“With continued turmoil in the crypto space and huge amounts of volatility, I’m not surprised to see 401(k) plan participants shy away from crypto as an asset class for retirement savings. Retirement accounts are historically reserved for prudent and proven asset classes that are regulated and have demonstrable track records,” Parks said.
Data shows other asset options are far more attractive than crypto, including real estate at 33.2% and even gold, with 7.3% of participants choosing it over crypto.
“We’ve never seen any demand for crypto from our plan participants or strategic partners. I think significantly more time and historical performance need to occur before we know if any crypto on the market today can offer long-term value, particularly as a retirement asset class,” Parks concluded.
Inflation up or down?
Ubiquity’s survey also polled advisors and plan sponsors about their economic outlook for 2023, which found have they opposite expectations for inflation at the end of 2023. 56.4% of financial advisors expect inflation to be lower by the end of 2023 compared to Q4 2022. But 57.3% of plan sponsors expect inflation to be higher at the end of 2023.
“One party is going to be right,” Parks said. “It will be interesting to see where inflation is at the end of 2023 and whether plan sponsors or financial advisors had a better feel for this in Q4 2022.”
SEE ALSO:
• Despite Remaining Optimistic, Advisors Report Fears Over Inflation and Investment Returns
• Ubiquity CEO Comments on SECURE 2.0 Impact for Small Businesses
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
The results of this study are an endorsement in regulatory changes encouraging auto-enroll and annual increases. We need to make it slightly harder to opt out while still providing that option. Secure 2.0 is a step in the right direction.