A national survey of both plan sponsors and plan participants reveals several key points of agreement and disagreement between the two constituencies.
American Century Investments’ “Survey of Retirement Plan Sponsors and Participants” finds, among other things, that plan sponsors and participants are on the same page regarding debt being the primary barrier to saving, but their views on risk, preferred levels of employer involvement and the importance of ESG offerings were more varied.
For example, although 40% of retirement plan sponsors believe market risk is the most important factor in target-date investments, 41% of American workers are much more worried about longevity risk and running out of money in retirement, according to the study. “Employees’ single-biggest fear is running out of money in retirement,” notes Diane Gallagher, American Century Investments Vice President, Value Add.
Comprised of responses from 500 DC plan decisionmakers and 1,500 full-time workers between the ages of 25-65, the firm’s 7th annual study examines plan sponsor and participant thoughts and concerns about retirement savings, and compares the findings.
Findings from the plan sponsor portion also show that more than 60% of sponsors were more concerned about their fiduciary liability now than ever before and 7 out of 10 say their advisor is currently doing their most important duty – investment selection and monitoring. What’s more, nearly all (96%) plan sponsors report that they are at least “somewhat satisfied” with their advisor.
Additionally, 75% of plan sponsors with an advisor rate education programs as “extremely” or “very” effective, while only 47% of those that do not use an advisor say the same.
For those plan sponsors that do not work with an advisor, perceived cost was cited as the top response for not doing so, by 47% of respondents, followed by 28% that said they “have expertise in house” and 14% that said they “don’t see value.”
Match Matters
Participants also expressed strong support for a company match over a higher salary. When asked whether they would take either a 100% match on 3% of their retirement plan contributions or a 3% higher salary, 76% of pre-retirees said they would take the match. This finding held true even for participants ages 25-54, where 63% said they would take the match.
What’s more, these findings were nearly consistent when given the option of a 6% match or 6% higher salary, with 77% of respondents saying they would take the higher match and 60% of participants ages 25-54 saying the same.
Nudge Welcomed
Additional findings show that plan sponsors’ view of the level of help participants desire also differed from reality:
- only 14% of younger plan participants (ages 25-54) wanted employers to “leave them alone” when it came to help with retirement savings; and
- 18% of older plan participants (ages 55-65) felt the same way.
Plan sponsors, however, thought some 28% of participants wanted to be left alone and, yet, more than 80% of those participants wanted at least a “slight nudge” from their employers.
Despite what their employers might think, employees want help with saving for retirement, notes Gallagher. “Employers underestimate the level of help employees want. We tend to listen to the ‘squeaky wheel,’ the person who says, ‘I’ve got this,’ but most workers want help; they want guardrails,” she explains.
ESG
The study also reveals that the importance of offering ESG options in plans varied between plan sponsors and participants.
Nearly all plan sponsors (90%) who offered or are considering offering ESG investments believe their participants would be interested and two-thirds of sponsors say their plan advisor is currently or should be recommending ESG solutions. That said, only 37% of participants actually expressed some interest in ESG options.
Gallagher further observes, however, that interested participants are aligned with plan sponsors if the ESG investment’s performance was comparable to the average product. “It will be interesting to track employee sentiment in the future and compare their interest in ESG choices down the road as individuals become more familiar with the term,” she adds.
Shifting Attitudes
Not surprisingly, more than 85% of employees have at least a “little regret” about not doing a better job saving for retirement, while 20% express a “great deal” of regret.
Their overall top regret is not saving more, with 7 out of 10 employee respondents saying they did not save enough in the first five years of their careers. Nearly all workers (90%) agreed that their workplace retirement savings plan is one of the most important benefits their employer offers.
When it comes to the primary barrier to saving, here employers and employees are aligned. For the first time, debt topped the list, ahead of not earning enough, unexpected expenses and enjoying today rather than saving. “We’ve heard plan participants say that they were always trying to get out of debt, so they didn't start saving early enough,” Gallagher notes. “The most important thing workers can do is take advantage of their retirement savings plan at work.”
Gallagher further observes that regret about not saving enough for retirement was more important to workers than not doing better in their careers, their personal relationships or even being a better person overall.
