A global survey of more than 4,000 retirement savers finds that most respondents appear confident in their ability to retire at their desired age, but many say they don’t know about certain aspects.
According to the latest MFS Global Retirement Survey of retirement savers across the U.S., the United Kingdom, Canada and Australia, 84% of retirement investors in the U.S. and Canada appear confident in their ability to retire at their desired age, slightly higher than the levels seen in the U.K. (76%) and Australia (71%). Similar levels were seen with respect to whether they believe their retirement savings will last throughout their lifetimes (82% among U.S. respondents, 77% in Canada, 78% in the U.K., and 68% in Australia).
MFS observes, however, that there are too many “I don’t knows” when it comes to expected rates of return and withdrawal rates. Among respondents aged 55 or older, between 28% (U.S.) and 51% (Australia) do not know what their expected withdrawal should be in retirement. Moreover, between 15% (Canada) and 30% (Australia) of respondents—the highs and lows of the countries—do not know what rate of return to expect on their retirement savings after fees between now and when they retire.
“While we don’t expect participants to become investment professionals, we believe a baseline level of engagement and awareness can improve outcomes,” notes Jessica Sclafani, DC strategist with MFS. “Our focus on the accumulation phase of the retirement savings journey allowed us to rely on ‘auto‐everything,’ but in the decumulation phase, we believe participants need to be more actively engaged to achieve their retirement goals.”
Globally Alike
Meanwhile, many retirement savers across the four markets say they expect to make a gradual transition into retirement, as opposed to fully retiring at a certain age, the survey also found.
As for how they envision their retirement unfolding, those age 45 or older—ranging from 43% of U.S. respondents up to 61% of U.K. respondents—say they will ease into it gradually. In contrast, only a fifth of all respondents have a specific date in mind, ranging from a high of 30% among U.S. respondents to a low of only 13% for Australian respondents.
“While laws, social safety nets and approaches to long‐term savings and investing may vary widely in these four countries, their populations have more in common than many in the financial sector believe when it comes to attitudes and concerns,” Sclafani notes. Consequently, she suggests that governments, employers and their advisors and consultants must rethink not only how they define retirement but also how to construct retirement plans that best meets the needs of their employees.
ESG Importance
Among Millennials, Gen Xers and Baby Boomers across the four countries, a majority of respondents—ranging from a low of 73% in the U.S. to a high of 81% in the U.K.—express a desire to see more investments that address environmental, social and governance (ESG) issues in their retirement plan.
On average, among U.S., Canadian and U.K. respondents, a majority indicate that they are likely to contribute more if a plan offers investment options that consider ESG issues. MFS also observes that while younger investors tend to show a greater willingness overall to consider ESG investing, Gen Xers and Boomers also value the option. In the U.S., for example, 66% of Gen X respondents and 59% of Boomers are interested in seeing more ESG investments offered in their retirement plans. Similarly, 66% of Gen Xers and 53% of Boomers would consider investing more in those options if they were offered.
“This is one subject in the ESG conversation that should not be neglected—ESG offers plan sponsors an opportunity to engage with participants on a topic that they actually want to talk about,” notes Sclafani. “It can be a challenge to get participants’ attention, and there’s a trope out there that ESG and sustainability are only for the young, but the data suggest otherwise,” she further emphasizes.
To that end, she notes that the firm is encouraging employers to get up to speed on ESG so they can make an informed decision as to how ESG considerations might fit into their retirement plans. Sclafani suggests that asset managers, advisors and consultants can play a role in helping investors “tune out the daily market noise” around ESG and can educate employers about the growing demand for consideration of ESG factors among participants of all ages.
TDF Misperceptions
MFS’ survey also reveals misperceptions around what target date funds actually do for investors as they near and enter retirement. More than half of U.S. respondents aged 50 or older believe that TDFs offer either a guaranteed rate of return (57%) or a guaranteed stream of income (60%).
“What makes target date strategies so appealing—that they are supposedly ‘set it and forget it’ funds—could be contributing to these misperceptions,” observes Sclafani. She explains that participants may not fully understand the amount of risk in their portfolios. “That’s why we’re encouraging plan sponsors to think about innovative ways to engage with their participants approaching retirement to help them understand what they can realistically expect from their target date fund in retirement,” she says.
Dynata conducted the survey among DC plan participants on behalf of MFS. To qualify, DC plan participants had to be ages 18 or older, employed at least part‐time, and active workplace retirement plan participants/members. A total of 1,020 U.S., 1,012 Canadian, 1,017 U.K., and 1,011 Australian plan participants answered the survey, which was fielded from March 31 to April 13, 2021.
