Retirement Confidence Ebbs
Defined Contribution Participant Perspectives: Second in a Series
With (generally) frothy equity values, sizzling GDP growth, improving labor force participation rates and buoyant participant economic attitudes, DC participants should be cruising into a golden age of confidence and engagement. It may be coming, but we haven’t seen it yet.
On the contrary, the same participants who perceive positive economic energy overall are oddly detached and perceptibly less confident than they were even a year ago when it comes to their own retirement planning and savings. On eight trended measures of retirement confidence—from knowing how they will care for their aging parents to having enough money to cover health care expenses—active DC participants are less confident than they were.
To be sure, some of the erosion is too modest to mean much. But the overall downward drift is a striking and counterintuitive offset to the broader economic euphoria captured elsewhere in the research. Tellingly, the biggest absolute (and proportional) decline is in the share of participants who consider themselves confident in being “ready for retirement financially,” down nine points to 51%.
Confidence in Retirement Planning Among Active DC Participants
For affluent participants with paid advisors or those with a formal written financial plan, the outlook is much more cheerful. Almost two-thirds (65%) of participants with a paid advisor are confident that they will be ready for retirement financially versus only 44% of those without an advisor. And almost all participants (91%) with a formal plan are confident that they know how much money they need for retirement versus only 56% for all participants.
The same restlessness which stalks overall retirement confidence attaches to investment decision making, if less dramatically. Fewer participants today than in 2015 are confident that their contribution and asset allocation levels are right and even whether or not they’ve selected (or had selected for them) the right investments. Again, having an advisor and a formal plan helps.
Confidence in Investment Decisions Among Active DC Participants
It’s not for lack of trying, but have providers and plan sponsors succeeded in giving participants the tools they need to make good retirement savings decisions and feel confident that they are on track? At the very moment when the economic environment is saying the answer should be “yes,” it’s “not so much” instead.
About the Research
Voice of the Defined Contribution Participant (VDP) studies were launched in 2010 by Brightwork Partners LLC; Brightwork was acquired by NMG Consulting in 2017. Findings are based on selected VDP waves carried out between 2010 and 2017. These studies are conducted online among nationally representative samples of active 401(k), 403(b) and 457 participants.
For more information, contact:
Merl W. Baker, 203.487.2000; [email protected]
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