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Data & Research March 16, 2020
Data Mine—March 2020
With each edition of the PLANADVISER Data Mine, we dig for the most actionable findings in the latest retirement plan industry research.
Reported by John Manganaro
Art by Jennifer Xiao
Are you inundated with data? Confused by surveys that seem to provide conflicting insights? With each edition of the PLANADVISER Data Mine, we dig for the most actionable findings in the latest retirement plan industry research. You can also click through to the full research reports, should you want to learn more about a particular topic.
Survey
The Forgotten Participant
Published by Invesco
Key Findings
- 65% of participants feel that a risk-based investment strategy would be a good fit for them personally
- 80% of higher-earning participants would invest in a risk-based strategy, if offere
- 64% of of plan sponsors are interested in adding risk-based strategies to the investment menu
Full survey is covered here. To complement the survey data, Invesco conducted a series of focus groups, finding that there is an informed population out there that is thinking deeply about risk, investment time horizons, and more. These people are not asleep at the wheel and they don’t just want to invest in target-date funds (TDFs).
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Survey
Plan Participant Survey
Published by Voya
Key Findings
Women earning over $90,000 have a greater average savings rate (10.3%) than men earning the same (10.0%), ultimately leading to a potential increase of $516 more per year in retirement income vs. their male counterparts.
Full survey available here. Voya’s research also found that women tend to think more rationally about investing by asking questions that will impact their decision-making, as opposed to being impacted by swings in the market. Because of this approach, women are often considered to be “risk-averse,” leading to an industry-wide impression that men are more capable investors than women. However, this is more perception than reality as women tend to earn higher returns than men when they do invest.
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Survey
2020 PLANADVISER Micro Plan Survey
Published by PLANADVISER Magazine
Key Findings
Micro plans lagged far behind larger plans in fiduciary best practices, such as having an investment committee. Forty-one percent of plans with less than $1 million lacked an investment committee.
Full survey available here. Advisers can play a critical role in helping micro-plan sponsors, particularly with complex areas of fiduciary responsibility such as monitoring fees and investment options. Without more support, these sponsors can miss opportunities available to them to improve plan outcomes.
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Survey
Average Account Balance a Key Driver of 401(k) Plan Costs
Published by the 401k Averages Book
Key Findings
In a comparison of the average costs of two 401(k) plans with the same total assets, data from the most recent 401k Averages Books showed plans with larger average account balances pay lower fees as a percentage of total assets.
Full survey available here. The data also shows the average investment expense for a 100-participant plan is 1.15%, compared to 1.22% for a 500-participant plan. The average total plan costs are 1.23% and 1.51%, respectively.
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Survey
How Well Prepared for Retirement Are Lower-Income Workers?
Published by the 401k Averages Book
Key Findings
A research study published by The Wharton School, University of Pennsylvania, explores how much low-earning households need to save considering Social Security’s progressive benefits. Researcher Andrew G. Biggs, from the American Enterprise Institute, points out that while low-earning households save little, their retirement incomes have risen steadily over the past few decades and their poverty rates dropped significantly, seemingly as a result of rising Social Security benefits.
Full survey available here. Biggs concludes that his analysis suggests that “to the degree that U.S. households are undersaving for retirement, this undersaving is not focused among low earners.” Yet, he says, initiatives to expand access to retirement savings plans have merit since many low earners currently lack access to one.