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Market, Longevity Risks Still Top of Mind for Workers

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What You Need to Know

  • Six in 10 workers acknowledged saving less than they should have, particularly in their first five working years.
  • Seventy percent of respondents said they need guidance on how to withdraw money from their retirement accounts.
  • More than half of respondents were interested in having ESG investments as part of their retirement plan.

Market risk remains the chief concern of American workers more than a year into the recovery from the pandemic, according to survey results released this week by American Century Investments.

Mathew Greenwald and Associates conducted the survey in March among 1,500 full-time workers between 25 and 65 who were saving through their employer’s retirement plan. 

“Market risk and longevity risk continue to be the top concerns for retirement plan participants.” American Century senior retirement strategist Glenn Dial said in a statement. 

“This may explain why, when it comes to taking withdrawals, 76% would be more likely to leave their money in their 401(k) plan if given an in-plan withdrawal solution.”

Two out of three survey participants said they know how much to withdraw for living expenses, yet only 60% know how long to make their money last in retirement. Seventy percent said they need a “little bit of guidance” on how to withdraw money from their retirement accounts.

“The good news is three out of every four workers show at least some interest in holistic financial advice, which has important implications for financial professionals,” Dial said.

The survey found that more than half of respondents were interested in having environmental, social and corporate governance investments as part of their retirement plan. Millennials and Generation Xers expressed the most interest, as did participants with incomes of at least $100,000. 

ESG is more attractive if investment performance is comparable, according to the results, with 65% of workers saying they would be interested in that case, compared with only 6% who said they would be interested even if performance is worse.

Expectations, Worries and Regrets

Twenty-nine percent of workers surveyed said they expect a better standard of living in retirement, yet 40% worried about running out of money. Six in 10 acknowledged that they had saved less than they should have, particularly during their first five years of employment.

Not saving more continues to be participants’ biggest life regret, a sentiment that participants expressed in American Century’s first survey in 2013, according to Dial. 

“We found that 35% of workers voiced this regret, which was more important to them than doing better in their career, doing better in personal relationships or even doing enough to enjoy life,” he said. “This clearly speaks to concerns about being ready for retirement.”

Dial noted, however, that four in 10 baby boomers among workers surveyed and 3 in 10 Gen Xers and millennials have advisors who could help them plan for retirement. Men were likelier than women to work with an advisor, use advice software or both.

Perceptions of Employers

Ninety percent of participants at least somewhat agreed that retirement plans are highly valued benefits. The workers most likely to strongly agree were men, those with household incomes of $100,000 or more and those with assets of at least $500,000. 

Although four in 10 said they want a “kick in the pants” or a “strong nudge” to save more, boomers were likelier than millennials and Gen Xers to be among the 22% who said they want to be left alone.

Employer matches are important to workers. The survey showed that 80% of boomers, 69% of Gen Xers and 59% of millennials prefer an employer match over a salary increase, whatever the percentage. And 82% of participants said they would rather have an employer contribution to retirement savings than help with education costs.

Automatic plan features also intrigue participants. Two out of 3 believe companies should have automatic enrollment with a 6% default rate, and some six in 10 believe employers should both automatically enroll and automatically increase the rate each year. 

In addition, four in 10 respondents said enrollment, contributions and default investments should be completely automatic for everyone. Men, those with incomes of more than $100,000 and those assets of at least $500,000, in particular, favor automatic options.

Pandemic Aftereffects

“We weren’t surprised to see that, following a year of the pandemic, participants are now more optimistic about saving, risk and expectations for the future,” Dial said.

Indeed, workers in the survey gave themselves higher grades on saving for retirement this year — an average of B-minus versus a C-plus in 2020 and a C-minus in 2019. 

Asked about their future in retirement, men tended to be more excited about pursuing hobbies, while women were more excited about travel. Moreover, paying off debt of all kinds, including longer-term credit cards and student loans, is a lower priority this year than it was last year.

Risk concerns diminished somewhat from 2020, with worries about outliving retirement savings falling to 58% from 63% last year; inflation and interest rate risk decreasing to 49% from 53%; and market risk worries going down to 51% from 61%.

“In short, we saw that investing for retirement is a priority for participants regardless of age, that employers are having a positive impact on accumulating assets, workers are now looking for help in withdrawing assets and that optimism is on the rise,” Dial said.