Retirement plan participants need help: Here's what they're dealing with and what they need
One area includes personalized advice and simplified menus, to help them make better decisions and build a bigger nest egg.
The economic realities of the pandemic provide a good opportunity for plan sponsors, employers and investors to take the pulse of retirement planning and reevaluate the best tools and strategies moving forward.
Many Americans tend to underestimate the amount of funds they will need for a successful retirement, neglect to plan for successful retirement spending and lack the confidence, knowledge and skills to make their retirement dreams a reality, according to Capital Group’s latest Wisdom of Experience survey of 1,200 retail investors.
Perception vs. reality. The study found that while more than a quarter of investors consider savings of less than $100,000 as “real money,” 43 percent of investors overall say their retirement goals exceed $1 million. Nearly seven in 10 investors are confident they will reach their retirement goals, despite this perception gap.
Retirement spending. Nearly nine in 10 investors favor creating a regular “retirement paycheck” to manage spending during their retirement years.
However, more than a quarter of investors have not yet thought about how they plan to spend their money when they retire, including nearly a third of Gen Xers and nearly a quarter of baby boomers who are much closer to retirement.
Anticipated post-retirement expenses also vary by age and gender. For instance, more than a quarter of millennials expect to pay for a child’s or grandchild’s education during retirement, while fewer than one in 10 baby boomers anticipate doing so.
401(k) confidence. More than eight in 10 investors are confident that investing in their employer 401(k) or other retirement savings accounts will help them build a nest egg, but less than one-third know what investment options their retirement plans contain.
One-third of women report feeling unprepared when selecting investment options in their workplace retirement plans.
Education toolbox. Overall, the study highlights certain gaps in investor confidence, knowledge and skills required to achieve dependable, long-term financial security.
It points to opportunities for employers to do a better job of educating their employees and providing them with the information they need to help them make the best decisions for their retirement nest eggs.
The survey report offers three areas of opportunity for financial advisors:
- Investors need help setting realistic retirement savings goals, anticipating expenses during retirement and navigating their employer-based 401(k) investment options and other retirement plans to make their financial goals a reality.
- Investors want to feel empowered to create their own retirement paycheck. Advice and planning are needed to help them make decisions about managing their money to meet their expenses and generate more income over more years of retirement.
- Investors are seeking personalized advice and simplified menus from their workplace retirement plans to help them make better decisions, increase their lifetime savings and build a bigger nest egg.
“More Americans can build a bigger nest egg and build toward a bigger retirement paycheck for more years of retirement,” the report concluded. “The research highlights the need for better workplace investor education and advice to help people make the best decisions.”
READ MORE