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Retirement Savers, Plan Sponsors Demand Income Products: BlackRock

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What You Need to Know

  • Nine in 10 DC participants express interest in products designed to generate retirement income,
  • Adoption of in-plan income solutions has lagged in large part due to the COVID-19 pandemic.
  • Women in all age groups were more concerned and felt less prepared for retirement than men.

Nine in 10 defined contribution plan participants express interest in products designed to generate retirement income, and a similar proportion say that having guaranteed income in retirement would positively affect their financial well-being, according to survey results released this week by BlackRock.

Three-quarters of respondents who were already retired report that having secure income in retirement makes a bigger difference than they thought it would. 

The vast majority of plan sponsors agree, indicating that they feel responsible for helping participants generate or manage their income in retirement, BlackRock said. 

BlackRock noted that although the 2019 Secure Act reduced barriers for plan sponsors to offer in-plan income solutions, adoption has lagged in large part because of reprioritization of human resources and benefits departments in response to the COVID-19 pandemic. 

However, 82% of plan sponsors surveyed that do not currently offer a retirement income solution plan to add one in the next 12 months. 

“Retirement income is a new frontier, and we’re encouraged that front-footed plan sponsors are embracing retirement income solutions — but the demand is much more urgent than the pace of adoption,” Anne Ackerley, head of BlackRock’s retirement group, said in a statement. 

“Workers saving for retirement today are concerned that they are going to outlive their savings, or that they may not enjoy a high quality of life in retirement. The time is now for companies to provide their employees with solutions that can help bring peace of mind.” 

Escalent conducted an online survey in March among 225 large DC plan sponsors and more than 1,000 plan participants and 300 retired participants in the U.S.

Pandemic Effects

The survey results showed that the pandemic has had a negative effect on retirement preparation for some, and has aggravated concerns for those plan participants who were already behind in their savings. 

Fifty-two percent of plan sponsors who keep track of short-term 401(k) loan withdrawals said employees used their 401(k) for emergency spending needs in 2020. Coupled with other pandemic effects, such as furloughs and suspensions of company matches, 61% of plan sponsors said at least half of their employees were negatively affected in terms of their retirement readiness. 

Sixty-eight percent of DC plan participants said they feel they are on track with retirement savings in 2021, with only 10% fearing they are not and 21% unsure. At the same time, 47% of participants overall said the pandemic has had some negative effect on how on track they are with saving for retirement. 

Demographic Divergence 

The survey found that 76% of millennials and 68% of Generation Xers believe that people in their generation will not have the level of retirement income that retirees used to have. This finding also aligns with millennials’ strong interest in retirement income, with 94% expressing interest in retirement income solutions. 

Of all the groups surveyed, A quarter of plan participants in that age cohort said they were unsure whether they were on track with their retirement savings, and 13% said they were not (more than any other age group). 

They cited not saving enough, the cost of living and other expenses as reasons for their concerns. 

Women across all age groups in the survey were more concerned and felt less prepared than men for their financial futures. Fifty-nine percent of women said they are on track with their retirement savings, compared with 78% of men. 

Fifty-five percent of men worried about outliving their retirement savings, compared with 64% of women. 

“Our survey data reinforces what we have seen from previous industry studies on the gender savings gap, so it’s not surprising to see that women feel they are behind,” Ackerley said. 

“We have an opportunity and a responsibility to help through enhanced plan design tools such as auto-enrollment, innovative solutions and leading educational resources to help savers understand what’s needed to get back on track and stay there.”