BlackRock Defined Contribution (DC) Pulse Survey: 401(k) Dilemma: Employers Are Concerned About Workers' Preparedness, But Perhaps Not Enough

NEW YORK--(BUSINESS WIRE)--

Companies are underestimating how much help their employees want with retirement planning, according to a new survey released by BlackRock BLK.

Reflecting their own concern about the state of their preparation, employees say employers should do more to help them prepare for retirement, in particular by helping them identify ways to generate income from savings and provide guidance on how much to save.

"Ten years ago, the PPA's passage underscored the increasingly critical role of retirement plans in employees' lives, and plan sponsors have worked hard since then to give more people access to the benefits of the DC approach," said Anne Ackerley, Head of BlackRock's US & Canada Defined Contribution Group. "It's clear that, with DC plans more critical than ever in safeguarding retirement well-being, plan sponsors have an urgent opportunity to re-visit the intent of the PPA and re-examine how to make their plans even more responsive to employee needs. Effective tools are widely available to plan sponsors to make the changes they need to keep plan participants on track to stable, secure retirements."

BlackRock's Defined Contribution Pulse Survey polled 1,003 participants in DC plans and 200 DC plan sponsors nationwide on a broad range of retirement planning issues and challenges in October through November 2015.

Employers, Employees Not Totally In Sync on Retirement Readiness

While 59% of sponsors say the majority of their participants are saving enough to retire with the income they will need, only 28% of the participants surveyed are confident they are saving enough. Similarly, 64% of sponsors say their participants are "very" or "extremely" informed about how much money they should be saving today for retirement, but only 37% of employees say they are.

Companies and workers are also far apart on the topic of retirement income: 58% of plan sponsors say workers are either "very" or "extremely" informed on how to generate income from their retirement savings; just 31% of workers say they are.

Despite this apparent disconnect, plan sponsors appear well aware of the challenges participants face. Forty-nine percent of plan sponsors surveyed agree that "my organization is facing an impending ‘retirement crisis' where participants will keep working because they are unable to afford to retire."

"Employers generally recognize that employees are under-prepared for retirement, but in some ways the problem runs far deeper than they realize," said Ackerley.

HELP WANTED… with Retirement Income

The BlackRock survey makes clear that workers – particularly younger workers – are eager for greater support for their retirement planning. In total, 55% of workers say that their employer should provide more help. The younger the cohort, the more decided the call for help: 63% of Millennials think their employer should be doing more to help them prepare for retirement, versus just 47% of Baby Boomers.

Better retirement income solutions represent one area where plan sponsors might provide more of the support workers seek, according to the survey. Although just 38% of workers have heard of products providing a consistent stream of income in retirement, 88% of workers said they would be interested in considering such a product (40% would be "very" or "extremely" interested). Among plan sponsors, 69% agree that there is a growing need for DC plans to provide retirement income solutions and services – however, just 51% say they currently do so.

At the same time, 65% of plan sponsors agree that participants would value more company help, and many are taking steps to make good savings practices automatic. In the past 12 months, about one in four plan sponsors have introduced auto-enrollment, auto-escalation and/or company matching into their DC plan.

Plan sponsors also are focusing on their older participants: 60% say they would like to find ways to encourage participants to stay in the plan after they retire.

10^th Anniversary of Pension Protection Act

To mark 10 years since the passing of the Pension Protection Act (PPA), which created new mechanisms for building participation in employer-sponsored DC plans, the survey examined views of the employer's specific responsibility in helping workers prepare for retirement.

In general, workers in DC plans have a positive view of their retirement investing. Nearly 70% of workers chose the words "confident," "optimistic," "hopeful," "certain," or "comfortable" when describing how they feel about the investing they do through their DC plan. But nearly half don't agree that they are "on track" to retire with the lifestyle they want.

Generational Differences

The survey revealed considerable differences among generational groups when it comes to levels of retirement planning – suggesting that plan sponsors need to think about targeted approaches in delivering support.

Millennials (age 25-34) see their retirement futures as bright – they are the most likely to affirm that they are on track with their retirement planning, and also most likely to be highly confident about one day enjoying the kind of retirement lifestyle they want. But at the same time, many are less involved in actual planning than workers in other generations. For example, less than 25% say they have evaluated their plan's investment options and features, and only about one third (36%) have increased contributions to their plan when possible.

Compared with other generations, Gen X'ers (age 35-50) are generally least confident about attaining retirement goals, including meeting their month-to-month expenses in retirement and leaving a financial legacy to their family. Gen X'ers also feel less informed about certain key aspects of their plan and the planning process, including how to generate retirement income from their savings and whether they are on track for retirement.

Baby Boomers (age 51-69), for their part, are split on what to do with their retirement savings when they retire, with 24% saying they are "not sure" what to do.

Call to Action for Plan Sponsors

The survey revealed considerable differences among generational groups when it comes to levels of retirement planning. "In a sense, this can be seen as proof of the effectiveness of the PPA," said Ackerley. "Most young workers have been automatically enrolled into workplace retirement plans and have the mindset that saving for retirement is just part of the working world." The concerns felt by older generations suggest that plan sponsors need to think about targeted communications and planning tools in delivering support.

Survey results also suggest several steps that can be taken to help DC plans go much farther for plan participants. Looking ahead, the DC industry, employers and policymakers need to work together to improve access to workplace 401(k) plans, get employees saving earlier in their careers and saving more, help employees invest appropriately for their life stage, and provide them with tools to responsibly generate income in retirement.

As the industry's largest investment-only DC plan provider, BlackRock reaches over 10 million American workers and manages more retirement assets than any other investment-only firm in the world. At December 31, 2015, BlackRock's U.S. & Canada DC group managed $620 billion. BlackRock provides a comprehensive range of tools, services and support to help DC plan sponsors measure participants' retirement readiness and closely assess the needs of diverse workforces; implement new plan features to boost participation, savings levels and age-appropriate investment, and enhance communications programs to drive greater employee engagement with the DC plan.

About BlackRock

BlackRock is a global leader in investment management, risk management and advisory services for institutional and retail clients. At December 31, 2015, BlackRock's AUM was $4.645 trillion. BlackRock helps clients around the world meet their goals and overcome challenges with a range of products that include separate accounts, mutual funds, iShares® (exchange-traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®. As of December 31, 2015, the firm had approximately 13,000 employees in more than 30 countries and a major presence in global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company's website at www.blackrock.com | Twitter: @blackrock_news | Blog: www.blackrockblog.com | LinkedIn: www.linkedin.com/company/blackrock

About the Survey

The BlackRock DC Pulse Survey is a major research study of 200 large and mega defined contribution plan sponsors and 1,003 plan participants in the U.S. executed by Market Strategies International, an independent research company. The plan sponsors who were interviewed had at least $300 million in assets, with nearly half of the respondents serving in benefits or human resources roles, and the rest in finance, investment or business management for their organizations. The 1,003 plan participants surveyed were employed full-time and were participating in their employer's 401(k), 403(b), 457 or 401(a) plan, with at least $5,000 in assets in their current account. All respondents were interviewed using an online survey. For the sponsor sample, the survey's margin of error is +/- 6.9 percentage points; for the participant sample, it is +/- 3.1 percentage points.

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