As Americans experience the impact of inflation, a new survey finds that employee interest in guaranteed lifetime income investment options has apparently increased since 2021, but a few barriers still remain.
This is according to Nationwide Retirement Institute’s survey of more than 500 plan sponsors of both public and private plans, and more than 1,000 plan participants. The survey found that more than half of employees are interested in guaranteed lifetime income investment options included as part of a target-date fund (TDF)—an 11-point increase since 2021 (53% vs. 42%).
In addition, nearly half (48%) report that they are interested in contributing to these investment options as part of a managed account. More than 4 in 10 employees (41%) would likely roll over retirement savings into a guaranteed lifetime income investment option if they were able to—a six-point increase since 2021.
Similarly, most employers report high levels of favorability (75% private sector and 86% government), interest (69% private sector and 70% government), and comfort (64% private sector and 73% government) with the addition of guaranteed lifetime income investment options within employer-sponsored retirement plans.
According to the findings, plan sponsors that offer these options are doing so because their company/organization believes they are great for employees (43%) and want to set them up for success in retirement (38%). Those who do not offer these options cite the overall costs for the employer (27%) as a top barrier.
Access and Familiarity
The findings also show, however, that a lack of access and familiarity is holding employees back from contributing to these investment options. Only about a fifth (21%) of employees are familiar with guaranteed lifetime income investment options, either as part of a TDF or a managed account.
When asked about barriers to not contributing to one, both employees (42%) and plan sponsors (38% private sector, 32% government) cite a lack of knowledge as the top barrier. This gap is further evidenced by the finding that while roughly half of plan sponsors report that their employer offers guaranteed lifetime income investment options, less than 2 in 10 employees report the same—suggesting a lack of awareness around employers’ retirement offerings.
Meanwhile, advice from a financial professional as well as webinars/training sessions are cited as the most helpful resources for learning more about guaranteed lifetime income options.
Nationwide found that employees and sponsors alike agree that advice from a financial professional (60% employees, 44% company plan sponsors) and webinars or training sessions (47% employees, 48% company plan sponsors) would be most beneficial in learning more about in-plan guarantees. Compared to 2021, more employees are looking for educational resources from their employer or the financial institution that manages their retirement plan.
Financial Pressures
Meanwhile, additional findings from Nationwide’s survey show that employees are losing confidence in their retirement security amid a challenging economic environment. Roughly one in four American workers (24%) feel they are on the wrong track for retirement and fewer than 6 in 10 employees (58%) have a positive outlook on their retirement plan and financial investments—a significant drop from 2021 when 72% indicated they had a positive outlook. Similarly, two-thirds of employees (66%) cite inflation as a top retirement concern (vs. 53% 2021).
While top financial goals for employees include covering retirement living expenses and having predictable retirement income, younger workers aged 35-44 report in higher numbers than those age 45 or older that they feel confused (21%) or panicked (16%) about their retirement plans and financial investments.
When analyzed across the public and private sectors, the study reveals that government employees are more optimistic than private sector employees about their retirement security. Only 28% of government employees are expecting to delay their retirement because of inflation versus 41% in the private sector. Three-fourths (75%) of government employees say they are on the right track when it comes to being financially prepared for retirement versus 56% of those in the private sector.
“Our research shows that employers and employees alike are starting to realize that guaranteed lifetime income offers unique confidence that workers are protected against inflation and market volatility and that individuals won’t outlive their savings,” notes Amelia Dunlap, vice president of Nationwide Retirement Solutions marketing. “Employers should work with their retirement plan advisor or consultant to help find the right investment solutions to set up their workforce for long-term financial success and the growth of the next generation of talent.”
Nationwide’s survey was conducted by Edelman Data and Intelligence from July 14–Aug. 5, 2022. Respondents included 500 benefits decisionmakers for company retirement plans including 401(k), 403(b), or 457(b) plans; 100 public sector plan sponsors/benefits decision makers (federal, state, local government) that offer a DC plan to their employees; 1,000 plan participants aged 45 or older who have access to a DC plan at their work; and 100 plan participants who are 35-44 years of age and have access to a DC plan.
