American Century’s 10th Annual Retirement Savers Survey

The first generation of 401(k) investors is retiring—and the rubber is hitting the road. The release of our 10th Annual Retirement Savers Survey reveals a turning point in plan design. Will you and your plan-sponsor clients be ready? 

Most participants nowadays expect automatic features, target-date defaults and matches as plan features. And withdrawal strategies and in-plan retirement income features are gaining momentum.
What do savers say they need to retire well? Join us for a look at the retirement journey—where we’ve been, where we’re going and what opportunities and challenges the next phase might bring. 

Presenters:

• Glenn Dial, Senior Retirement Strategist, American Century Investments

Most people consider themselves average savers, with three quarters of survey participants giving themselves a C+ on average. Let's look at the reasons behind why people are giving themselves such low ratings. 

First, there are multiple causes of worry for participants. The reported main worries are market volatility for those about to retire, employee savings habits, and proper asset allocation of those who choose their own investments. Ironically, even though two main worries are market volatility and proper asset allocation, only a third of employees are working with an advisor.

There are options that retirement savers are more interested in than others, such as auto-enrolling at 10% as a default for retirement plans. Four in ten said that they want a "kick in the pants" or "strong nudge" to save more, and auto-enrollment could be that nudge they are looking for. With the risks of inflation and interest rates being a concern for participants, plan sponsors are thinking that target date funds (TDFs) are the way to go to address those risks. 

Speaking of TDFs, plan sponsors believe that active management is the most important TDF attribute. Two thirds prefer a TDF that protects against significant losses comparted to one that has the potential to outperform and are wondering if it should look more like a defined benefit plan.

With participants needing guidance on how to withdraw money from their retirement accounts, nearly all plan sponsors agree that employers should offer income features to help turn those retirement account balances into a steady income stream for participants. 4 in 5 plan sponsors believe that participants should keep their assets in the plan as long as an in-plan feature is available (this is consistent with what plan sponsors have said in the past).

Overall, intentions are good but saving/investing is a slog, so automate as much as possible. Participants rely on their employers and advisors for help, meaning as a plan advisor, continue pushing employee benefits to your plan sponsors for higher retention rates. Volatility presents an opportunity to revisit investment menus and it might be time for a target-date deep dive. Lastly, accumulation battles may be won but now it’s time to focus on decumulation.