Nearly a third of employees want their income protected against market losses starting at age 50, and almost all of them want market protection before the age of 65, according to new research from American Century Investments.
Inflation and interest rates were a top concern for 64% of workers, and market volatility was a top concern for 53%. Consequently, 73% of workers want an investment that protects against losses, and a majority would prefer to have their account balance’s ability to generate guaranteed income automatically protected.
At least 60% of respondents reported they believe their standard of living in retirement will be about the same or better than it is currently, a figure that’s held steady or increased since American Century first began tracking the issue in 2013. In the latest survey, 73% of respondents are optimistic about their retirement. Optimism has only been higher in 2017, 2018, and 2021.
Glenn Dial, American Century’s Senior Retirement Strategist, believes this optimism may be related to innovation in the space and, specifically, confidence in the features and products recently developed to address workers’ needs. For example:
- Interest in automatic enrollment in an employer-sponsored plan grew from 65% in 2013 to 71% in 2022 (and increased from a default enrollment of a 6% contribution to 10%).
- Participant interest in target-date funds (TDFs) has grown even more significantly, rising from 55% in 2013 to 72% in 2021.
- Plan sponsors are very confident in TDFs: more than 9 in 10 believe target-date funds address longevity risk as well as inflation and interest rate concerns, and two-thirds say they would prefer a TDF, which helps participants protect savings from significant losses.
“As it pertains to income, this may be why there is a clear preference for participants to have all of their account balance protected in the form of a default, then choose how much guaranteed income to take at retirement,” Dial said.
On the employer side, 94% feel responsible for helping employees save for and spend down their retirement, and 80% want employees to keep their assets in their plan. Nearly all agree that it’s crucial to provide features that allow employees to turn their balance into a reliable income stream when it’s time to retire.
“While employers are torn, almost half would prefer to have guaranteed income as the default,” Dial concluded.