Retirees offer "surprising" revelation, while participant confidence takes a rollercoaster ride

The pandemic may have shaken the confidence of workers that they’re saving enough for retirement, but for those who are actually now retired – the vast majority feel satisfied about their quality of life.

Confidence levels took a dive from 2018, but –

More than a third (35 percent) of the 1,015 participants in workplace defined contribution plans surveyed last July by AllianceBernstein “feel confident or very confident” that they will have a comfortable retirement.

While that’s higher than the 29 percent average level of good confidence over the 16 years the Nashville, Tennessee-based global investment management firm has canvassed plan participants, it’s a sharp drop from 2018, when nearly half (47) felt that way.

“The pandemic has really impacted a lot of people – many lost jobs or were temporarily furloughed, making it difficult for them to pay their bills,” Jennifer DeLong, head of defined contribution, tells Benefits Pro.

“On top of that,” DeLong says, ”there’s a great amount of political and economic uncertainty, and newer concerns about inflation impacting workers’ confidence levels.”

Adds Heather Balley, director of participant communications: “The thing that makes people feel confident or not confident about retirement is often the same thing, which I always find interesting – for example those who are confident, say “I have enough savings” and those who are not confident say  “I don’t have enough money saved.”

‘Magic number’ for confidence

Fortunately, a significant majority of the survey respondents who did not express confidence when surveyed last July at least believe they are either “definitely on track or think that they are on track” to eventually save enough for retirement.

When asked what level of assets they want to have at retirement “to feel completely comfortable that their money would last as long as needed,” almost 60 percent of respondents say $500,000 or more – though just 14 percent of them currently have that much in their retirement savings accounts.

“Plan sponsors really have an opportunity to make their defined contribution plans the best that they can be for their employees, including offering auto enrollment and giving employees the tools to help them better prepare and plan for retirement,” DeLong says. “That can also mean offering guaranteed retirement income solutions, as well as offering financial wellness programs.”

Retired former plan participants offer “surprising” revelation

Interestingly, 200 former plan participants who are now retired were also surveyed, and they had an “overwhelmingly positive response” about their quality of life – a “surprising” revelation considering the amount of assets most now have, according to the report.

More than half have an annual income – from all sources, including pensions and Social Security – of less than $50,000, and another 34 percent estimate that their annual retirement income is between $50,000 and $100,000. Only 10 percent have higher annual incomes. Even so, 80 percent say that their quality of life in retirement is either “about what they expected or exceeds expectations” – and 10 percent feel that it “far exceeds expectations.”

As for plan participants aged 55 to 75 who are still working, a quarter of them plan to transfer their DC plan assets into an IRA upon retirement, and nearly a fifth would leave those savings in the DC plan – “Leaving assets in a plan after separation is really a win-win for both participants and plan sponsors,” DeLong says.

As for other respondents nearing retirement, 11 percent would purchase an annuity, 5 percent would take a lump-sum distribution and 19 percent have not thought about what they would do yet.

Plan sponsors want this asset but fund variations overwhelm

An additional AllianceBernstein survey also found that two-thirds of plan sponsors view the integration of ESG considerations into investment decisions as “a fiduciary duty,” although 42 percent grapple with the many fund variations on the theme of ESG.

“This is a hot topic that everyone is talking about – but what does that really mean? Consistency in ESG definitions is really a conundrum right now,” Balley says.

Even so, in the separate survey of plan sponsors, a majority say that they currently include some form of responsible investing options on their plan menu.

“Many larger plan sponsors are now requiring from any asset manager that ESG is integrated into the investment process and many are well ahead,” DeLong says.