Workers, Plan Sponsors Split on Market Outlook and Retirement Income
Workers and their employers remain disconnected on priorities and expectations for retirement planning, shows new findings from American Century Investments.
The firm’s annual National Retirement Survey fielded responses from 1,500 full-time workers and 500 plan sponsor representatives and found gaps in financial and market perceptions from both groups. While employers believe that 77% of participants can tolerate a loss of greater than 10%, almost half (46%) of workers surveyed said they could handle a drop of less than 10%. In reality, only 19% of participants say they are “very accepting” or market risk.
Further, while only 14% of participants prefer aggressive target-date funds (TDFs), 38% of plan sponsors do. Instead, 68% of participants would rather be allocated to moderate TDFs and 18% favor conservative TDFs.
On the retirement end, 56% of plan sponsors think their employees can manage finances without a paycheck in their later years, whereas only 42% of workers hold the same opinion. In fact, less than half of employees are ready to navigate decisions in transitioning to retirement and 30% feel like they could retire earlier than expected if needed for health or caregiving needs.
Such decisions include determining whether a lifetime income feature is needed, American Century added. Ninety-three percent of participants in the survey expressed interest in annuity options, while one in three sponsors said they’re actively considering incorporating a solution to the plan.
“The transition to retirement creates concerns like how to turn savings into income and how to protect against market losses. We are helping advisors with important client conversations to educate and prepare individuals for retirement,” said Glenn Dial, senior retirement strategist for American Century Investments. “Advisors are in the unique position to hear how much participants worry about achieving a successful retirement, whether that is having enough money or maintaining an income. They also need an advisor who can listen and understand their concerns, then respond with the best plan.”
Participants and plan sponsors both support additional education in retirement planning, with eight in 10 participants wanting help turning savings to income and 86% of employers agreeing. Still, only 44% of sponsors said they offer resources for managing finances in retirement and 40% provide help in generating retirement income.
American Century offers insights on how advisors can support plan sponsor and participant clients, from looking at participant risk preferences and providing tailored education on TDFs and retirement income, to encouraging participants to seek out educational tools and the products that support retirement goals.
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.
