Participants in defined contribution retirement plans want direction—and even prompts—from their employers when it comes to saving for retirement. That’s one of the findings from a survey by State Street Global Advisors, the asset management business of State Street Corp.
“The ongoing volatility in the financial markets has increased anxiety among plan participants and a significant percentage want simplified and prescriptive guidance in order to make progress toward their retirement goals,” said Kristi Mitchem, senior managing director and head of Global Defined Contribution for State Street Global Advisors.
More than nine in 10 respondents (93%) said that having a computer tool to guide them through investment choices would help them save more. Most of them favored auto-enrollment and auto-escalation features, even though the features were not well understood. Three in four indicated that they would be willing to be automatically enrolled in a 10% savings “boot camp” for six months. Almost as many (74%) said that “making me automatically do something like save more or invest in a professionally managed fund” would improve their retirement readiness.
A little over half of the respondents (54%) said they were “very” or “somewhat confident” that their savings were on track to fund their planned retirement lifestyle, the study found. The others who weren’t so confident blamed themselves or the economy for insufficient retirement savings. Only a few blamed their employer.
Other interesting findings: Defined contribution plan participants have a low level of awareness of inflation risk and long-term investment risks. On a lighter note, the study found that younger workers are more conservative and more likely to save than their older counterparts.
The findings are not entirely in synch with those in a recent IRI study, which showed that defined contribution plan participants value the ability to choose and control their investments. The majority of the participants in that study said they opposed the notion of not allowing individuals to make investment decisions in their accounts. Nearly eight in 10 in that study disagreed with the idea of replacing all retirement accounts with a government bond.
The State Street Global Advisors survey included more than 1,000 401(k), 403(b), profit sharing and stock purchase plan participants. The IRI study surveyed 3,000 U.S. households.
Margarida Correia writes for Bank Investment Consultant.