BlackRock, the world’s largest investment firm with $4.6 trillion in assets under management, has released its findings from its annual review of the defined contribution market.
The picture painted, Retirement Readiness: A work in progress, shows the efficiency of modern workplace plan design leaves much to be desired.
Perhaps most notable is the disparity in how sponsors and participants perceive the functionality of the typical 401(k) plan.
Take for example the basic question of how much participants need to be saving to fund an adequate retirement nest egg.
Of the 200 plan sponsors surveyed, 64 percent reported that their participants have a good understanding of how much in savings should be deferred from salaries.
But far fewer participants—37 percent—told BlackRock they were confident in knowing how much to save.
Even more sponsors—67 percent—said participants were well educated on investment options, while only 43 percent of participants agreed with their employers. Nearly one-fifth of the more than 1,000 participants surveyed said they don’t understand the investment options in plan menus.
Only 35 percent of participants claimed to be informed when it came to their plan’s automatic deferral features—about half the number of sponsors said were adequately educated on automatic features.
And on where the rubber meets the road—the question of how many participants are well prepared for retirement—sponsor and participant disparity was perhaps most glaring in BlackRock’s survey.
A majority of sponsors—59 percent—say the majority of their participants are saving enough for retirement.
Yet only 28 percent of participants believe they are.
Despite sponsors’ apparent overestimation of participants’ familiarity with retirement plans’ functionality, about half of sponsors said their “organization is facing an impending retirement crisis where participants will keep working because they are unable to afford to retire.”
The highlights of the dissonance between participant and sponsor perspectives speaks to underlying problems in plan communication and education efforts, suggested Anne Ackerley, head of BlackRock’s defined contribution group.
“Employers generally recognize that employees are under-prepared for retirement, but in some ways the problem runs far deeper than they realize,” said Ackerley.
One-quarter of plans made auto escalation automatic last year, and another quarter of sponsors added the feature with the option to opt-out.
An area of parity between participants and sponsors exists in the area of plan communications, the report found.
Which is to say, existing communications, and restrictions on what can be communicated, are failing many savers: 45 percent of participants said communications don’t help inform them on the right savings direction; 49 percent of sponsors said that by the time they have delivered legally required communications, few options remain at their disposal.
Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.
Your access to unlimited BenefitsPRO content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
