THE PLAN SPONSOR’S VIEW OF RETIREMENT’S FUTURE:
MOST OF TOMORROW’S “RETIREES”WILL STILL BE WORKING
Sponsors Concerned that Most Workers Not Saving Enough, Won’t Have
Enough Money to Last Through Retirement
Strong Sense of Responsibility for Workers Drives Sponsors; Many
Plans Moving to Strengthen Savings Options
An “Income Gap” Still Looms; Sponsors (and Workers) Believe Plans
Should Provide Secure Income – But Currently Few Do
NEW YORK--(BUSINESS WIRE)--
Though relatively few U.S. workers today anticipate having to work for
income in retirement, defined contribution (DC) plan sponsors believe
that most of tomorrow’s retirees will need to do exactly that, according
to polls of workers and companies released today by BlackRock, Inc.
(NYSE: BLK).
Nearly eight of 10 DC plan sponsors polled by BlackRock agree (and 30
percent strongly agree) that “the days of working until the age of 65,
retiring, and then never having to work again are generally over for
most workers.”
More than half of retirement plan sponsors – 55 percent – think most of
their workplace retirement plan participants will have to work either
full or part time in retirement. By contrast, just 15 percent of workers
participating in DC plans anticipate needing to work for income in
retirement.
“Retirement is going to change, and one of the biggest changes will
likely be an enduring role for employment even in retired life,” said
Chip Castille, Managing Director and head of BlackRock’s US & Canada
Defined Contribution Group. “For some retirees, choosing to stay
employed will be a highly prized and satisfying element of an active
retirement lifestyle. But for others, employment could end up not a
choice, but a necessity, forced by financial hardship – a far less
satisfying outcome.
“Giving retired Americans sufficient financial security to retain a
degree of choice about working in retirement – after a lifetime of
employment - should remain a key goal of the nation’s retirement
system,” he said.
The poll of 118 plan sponsors was conducted on the Internet during March
2012 by Boston Research Group on behalf of BlackRock’s U.S. Defined
Contribution business. The plan sponsor sample represents major DC plans
with more than $351 billion in plan assets and more than 3.4 million
plan participants.
BlackRock also released today the findings of two other interlinked
polls of 1,002 workers and 1,035 retirees. A copy of those
findings can be found at www.BlackRock.com/RetirementSurvey.
“Today, DC plan sponsors have a uniquely informed view of the ongoing
evolution of the corporate retirement system as well as retirement
itself, shaped by experience day-to-day with what’s working in employee
retirement planning – as well as recognition of areas where tangible
progress still needs to be achieved,” said Castille. “Sponsors feel
highly responsible for the retirement planning needs of their employees
and – while many are concerned about workers’ retirement planning and
prospects – they also realize there are ways to make the DC system work
even harder on participants’ behalf.”
Sponsors Feel Strong Sense of Concern, Responsibility
Sponsor concern about workers’ retirement planning stretches across the
spectrum of retirement financial needs.
Only 43 percent of corporate retirement plan sponsors are confident that
their workers are saving enough now to get the monthly income they want
in retirement; by contrast, about 67 percent of workers are confident
that they are saving enough.
Four in 10 sponsors think the greatest financial challenge their
employees will face is “not having enough money to last through
retirement.”
Sponsors’ view of their responsibility outstrips even what workers
themselves believe it to be. About two thirds of sponsors strongly agree
an employer should educate employees on the realities of longevity in
retirement, compared with just 25 percent of workers. Similarly, four in
10 sponsors – but just 22 percent of workers – strongly agree they
should warn employees if they are not saving enough money to last
through retirement.
Income Options Not Yet Widely Offered
About three quarters of sponsors – as well as 89 percent of workers -
also believe that employers should provide employees with secure income
generating options in their workplace retirement plan. Nearly nine of 10
(86 percent) sponsors agree (and 20 percent “a great deal”) that their
participants would benefit from an in-plan guaranteed income solution.
Yet, just 11 percent of DC plan sponsors say they offer an in-plan
guaranteed income solution, and of the companies not offering this
solution, just 19 percent say it is likely that they will add it to
their plan in the next 12 months. Nearly half of sponsors not yet
offering an income solution said their biggest hurdle was not having the
time to “conduct proper due diligence.”
“As traditional pensions wane, American retirees face a growing
retirement income gap, and there is growing belief among participants
and sponsors alike that DC retirement plans can – and should – help fill
the gap,” said Castille. “Removing the hurdles to delivery of secure
income must be a priority for the entire DC community.”
Providing Support for the “Accumulation Phase”
Sponsors are actively moving to provide new plan options for DC’s
“accumulation phase,” in particular, the target date fund (TDF) – which
automatically rebalances and reallocates assets over time to become more
conservative and lower the chance of losing money as the worker nears
planned retirement age.
Eight of 10 sponsors say they offer TDFs. Of these, 18 percent say they
implemented a full plan re-enrollment, under which all participants were
defaulted into a TDF or similar investment from their current
allocations. Nine of 10 sponsors say that participants responded
positively to the re-enrollment.
“Worker appreciation of the TDF approach shows the value of plan
innovations that tangibly support good outcomes – in this case, better
savings,” Castille said.
Need to Build Participant Appreciation of DC’s Value
Though big strides have been made in focusing DC on what participants
most require for effective planning, the polls also suggest that
sponsors need to redouble efforts to build worker appreciation of the
value of key plan features.
For example, about seven of 10 sponsors think their plan has been
helpful in warning employees if they are not saving enough money to last
through retirement, but just 41 percent of workers share this view.
Sponsor and worker views of plan helpfulness diverge as well on such key
areas as educating employees on the realities of longevity in retirement
(78 percent vs. 52 percent), and helping employees “get through
retirement, not simply reach it” (71 percent vs. 50 percent).
“The DC system has come a long way, but sponsors and workers alike
recognize that DC is still an evolving proposition and that there is
much still to do before DC fulfills all its promise,” he said. “In
particular, we need to help both sponsors and workers take advantage of
emerging products that can help focus DC on solving retirement’s most
urgent problems – especially the delivery of secure, life-long
retirement income.”
For more information on the BlackRock survey, please visit www.BlackRock.com/RetirementSurvey.
About BlackRock
BlackRock is a leader in investment management, risk management and
advisory services for institutional and retail clients worldwide. At
March 31, 2012, BlackRock’s AUM was $3.684 trillion. BlackRock offers
products that span the risk spectrum to meet clients’ needs, including
active, enhanced and index strategies across markets and asset classes.
Products are offered in a variety of structures including 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®.
Headquartered in New York City, as of March 31, 2012, the firm has
approximately 9,900 employees in 27 countries and a major presence in
key 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.
About BlackRock Defined Contribution
Retirement is harder than ever before. That’s why many of the world’s
largest DC plans trust BlackRock with their participants' retirement
futures. As an independent, global DC investment-only provider,
BlackRock provides a breadth of capabilities and depth of knowledge
across asset management, plan design, client engagement and participant
communications. Our dedicated DC professionals work with plan sponsors,
consultants and financial advisors to share the best thinking from
across the globe and objective insights on the ever-evolving challenges
of this new world. BlackRock aims to help you bring clarity to the most
complex retirement plan objectives, so that together we can deliver the
best possible outcomes for participants. For additional information,
visit www.blackrock.com/dc.
About Boston Research Group
BRG is a strategic market research and consulting firm that specializes
in the financial services and employee benefits industries. The firm
conducts projects dealing with both strategic and tactical marketing
issues, including loyalty and satisfaction, market segmentation, brand
assessment, product development, sales processes, and distribution
strategies. BRG focuses on applying market research information,
collected and analyzed using qualitative and quantitative data
collection techniques and methodologies, to provide solutions for
marketing-related challenges. The firm has extensive experience studying
DC participants, plan sponsors, retirement plan advisors, and search
consultants. BRG has conducted the leading syndicated plan sponsor,
participant and advisor studies since 2000. The BlackRock study was
directed by BRG’s president, Warren Cormier, who is co-founder of the
Behavioral Finance Forum along with Dr. Shlomo Benartzi, a pioneer in
participant behavior.
The opinions expressed are as of May 3, 2012 and may change as
subsequent conditions vary. The information and opinions contained in
this material are derived from proprietary and non-proprietary sources
deemed by BlackRock to be reliable, are not necessarily all inclusive
and are not guaranteed as to accuracy. Past performance is no guarantee
of future results. There is no guarantee that any forecasts made will
come to pass. Reliance upon information in this material is at the sole
discretion of the reader.
Call 1-855-BLK-8880 for more information. Visit blackrock.com or
iShares.com or contact your financial professional for a prospectus or
summary prospectus, which includes investment objectives, risks, fees,
expenses and other information that you should read and consider
carefully before investing. Investing involves risk, including possible
loss of principal
©2012 BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK
SOLUTIONS, iSHARES, INVESTING FOR A NEW WORLD, are registered and
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respective owners.
BlackRock, Inc.
Media Relations:
Brian Beades,
212-810-5596
Brian.Beades@BlackRock.com
or
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Source: BlackRock, Inc.