Plan sponsors concerned by the impact of COVID-19, though many savers feel they are still on track for retirement
Confidence in retirement readiness differs along lines of age group and gender
A large majority of workers saving for retirement through their employers’ 401(k) plans want options that will help them generate income in retirement, according to the fifth annual DC Pulse Survey from BlackRock (NYSE: BLK).
According to the survey, 89% of defined contribution (DC) plan participants are interested in owning a product designed to generate retirement income, and almost 9 in 10 said having guaranteed income in retirement would have a positive impact on their financial well-being. Respondents who were already retired also weighed in – 76% say having secure income in retirement makes a bigger difference than they thought it would. And employers agree, with 96% of plan sponsors indicating that they feel responsible for helping participants generate and/or manage their income in retirement.
While the SECURE Act of 2019 reduced barriers for plan sponsors to offer in-plan income solutions, adoption has lagged – due, in large part, to the necessary (though unforeseen) reprioritization of HR and benefits departments in response to the pandemic. Encouragingly, though, 82% of those who do not currently offer a retirement income solution plan to add one in the next 12 months.
"Retirement income is a new frontier, and we’re encouraged that front-footed plan sponsors are embracing retirement income solutions - but the demand is much more urgent than the pace of adoption," said Anne Ackerley, Head of BlackRock’s Retirement Group. "Workers saving for retirement today are concerned that they are going to outlive their savings, or that they may not enjoy a high quality of life in retirement. The time is now for companies to provide their employees with solutions that can help bring peace of mind."
The Impact of the Pandemic
The survey results also demonstrate that COVID-19 had a negative impact on retirement preparation for some – and for those plan participants who were already behind in their savings, the pandemic exacerbated their concerns. More than half (52%) of plan sponsors who keep track of short-term 401(k) loan withdrawals said employees used their 401(k) for emergency spending needs during 2020. Coupled with other impacts of the pandemic, such as furloughs and suspensions of company matches, 61% of plan sponsors said at least half of their employees were negatively affected in terms of their retirement readiness.
Encouragingly, 68% of DC plan participants still feel they are currently on track with retirement savings in 2021, with only 10% fearing they are not (21% are unsure where they stand). However, 47% of participants overall say that the pandemic has had some negative effect on how on track they are with saving for retirement.
"The effects of COVID-19 have been felt by American workers in different ways. We know that many people who lost their jobs were forced to withdraw from their long- term savings– but our data shows that this was also the case for a number of people who were fortunate enough to remain employed," said Ackerley. "The good news is that there are resources for employers that will help them with a more holistic approach to financial planning and education for employees, such as the Emergency Savings Initiative. Accumulation, income, and short-term savings funds can be viewed as interlocking pieces in an overall plan for retirement security."
Divergence across demographics
The survey found that savers who are earlier in their careers believe that they will not be able to enjoy the same quality of retirement as previous generations. When it comes to financial security in post-retirement, 76% of Millennials and 68% of Gen X’ers agree that people in their generation won’t have the level of retirement income that retirees used to have. The data also aligns with Millennials’ strong interest in retirement income, with 94% expressing interest in retirement income solutions.
Of all the groups surveyed, Gen X remains most uncertain about their future retirement security: 25% of Gen X plan participants are unsure if they are on track with their retirement savings, and another 13% say they are not (more likely than any other age group). Not saving enough, the cost of living, and other expenses are the reasons cited for their concerns.
Across all age groups, the responses to the survey along gender lines provided clear insights that women are more concerned and feel less prepared than men for their financial futures. 59% of women feel that they are on track with their retirement savings, compared to 78% of men. 55% of men are worried about outliving their retirement savings, compared to 64% of women.
"Our survey data reinforces what we have seen from previous industry studies on the gender savings gap, so it’s not surprising to see that women feel they are behind," said Ackerley. "What’s helpful about these data points is that we know where we need to focus our efforts. We have an opportunity and a responsibility to help through enhanced plan design tools such as auto-enrollment, innovative solutions and leading educational resources to help savers understand what’s needed to get back on track and stay there."
BlackRock’s purpose is to help more and more people experience financial well-being. As a fiduciary to investors and a leading provider of financial technology, we help millions of people build savings that serve them throughout their lives by making investing easier and more affordable. For additional information on BlackRock, please visit www.blackrock.com/corporate
About the DC Pulse Survey
The BlackRock DC Pulse Survey is a research study of 225 large defined contribution plan sponsors in addition to over 1,000 plan participants and 300 retired participants in the U.S. The survey is executed by Escalent, Inc., an independent research company. All respondents were interviewed using an online survey conducted in March 2021. This is the fifth year that BlackRock has conducted the DC Pulse Survey to provide insights into the minds of participants, retirees and plan sponsors.
The plan sponsors who were interviewed had at least $300 million in assets, with one-third of the respondents serving in benefits or human resources roles, and the rest in finance, investment or business management for their organizations. The plan participants surveyed were employed full-time at the time of the survey and participating in their employer’s 401(k) or 403(b) plan, with at least $5,000 in assets in their current account. Retirees who participated in the survey were retired at least 10 years and previously enrolled in a 401(k) or 403(b) plan; some have stayed in plan after retirement. Broken down by age group, the sample size was 24% Millennial, 26% Gen X, 37% Boomer, and 13% Silent Generation. All respondents were interviewed using an online survey. For the sponsor sample, the survey’s margin of error is +/- 6.5 percentage points; for the participant sample, it is +/- 3.1 percentage points.
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