Americans are living longer and working differently. In order for institutions — from governments to health-care systems to corporations — to sync to individual needs, they must first understand them. In the realm of retirement, insight, particularly into a participant’s full portfolio picture, is limited.
To improve that insight, we undertook our 2019 global survey of retirement goals and challenges, for which we interviewed 195 defined contribution (DC) plan sponsors globally, including 42 from the United States. Here, we’re sharing 5 country-specific highlights:
Because of the modern career experience, often a mosaic of past jobs, patchy defined contribution (DC) plan participation and a scattering of savings, retirement readiness blind spots exist for employers and employees alike.
For sponsors, their limited view is reflected by their estimates for employees’ replacement income ratio: 43% anticipate that participants will have less than 10% of their current income available to them in retirement and 26% expect replacement ratios between 10% and 30%.
However, despite this dismal forecast, sponsors are optimistic about their participants’ ability to retire at retirement age (79% express confidence) and afford their current lifestyle once in retirement (more than 50% are confident in affordability outcomes for the majority of their participants).
How do sponsors reconcile these conflicting insights? Perhaps employers are relying on the assumption that employees have access to sufficient retirement income outside of the workplace savings plan — from past employer plans to Social Security to real estate and investments to spousal income and benefits. But staying anchored to this assumption may lead sponsors to miss the opportunity to help participants optimize wealth accumulation.
Despite having an incomplete picture of participants’ preparedness, employers are eager to support employees by choosing plans that deliver low costs to the saver, a thoughtful investment selection and features that are a combination of intuitive and automatic.
As the era of defined benefit plans wanes, facilitating access to financial advice specific to retirement becomes an important dimension of plan design. However, sponsors are split on who sources and pays for advice, responses that may be driven by fiduciary concern and organizational constraints versus a lack of commitment.