Client Service May 8, 2018

Education a Top Factor in Gaining Retirement Plan Participants’ Trust

“This study shows that for financial firms who want to improve retirement savings outcomes must evolve their role from just account providers to trusted partners that people can turn to for help on holistic financial wellness,” NARPP says.

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Americans who participate in 401(k) plans are increasingly more trusting of the financial firms they rely on to manage their retirement savings, according to the National Association of Retirement Plan Participants (NARPP) 2018 Participant Trust and Engagement study, which tracks the attitudes and behaviors of 4,500 retirement plan participants from across the country,

The study reveals that trust in one’s retirement plan provider is at 30%, an all-time high, up from a low of 26% in 2016. Following the same trend, confidence has increased to 46% from a low of 35% in 2014. The study shows that higher levels of trust lead to better financial decision-making which includes higher rates of savings, increased commitment to savings, and increased loyalty to providers.

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The study revealed factors that increase participants’ trust in retirement plan providers:

  • Education satisfaction;
  • Transparent fee information;
  • Information provided is relevant;
  • Provider is viewed as a partner; and
  • The feeling that information provided is “in my best interest.”

Forty-three percent of participants are satisfied with education they are provided.

The research found retirement plan participants are confused on topics related to fees and investing basics. Fewer than half (49%) say they know how much they’re paying in fees, 19% understand investing principles, and only 17% feel the information presented to them by their provider is in their “best interest”.

The study also highlights how stressed savers are about their finances; 53% feel very or somewhat stressed about their financial situation. Employees with higher levels of financial stress have less trust in their employer, with only one in four reporting they “trust their employer to do what’s right.” Neither household income nor level of education are related to financial stress; however, debt plays a large role in it.

Saving for retirement has strong competing financial priorities such as paying off student loans and supporting other family members. Almost half of study participants (47%) report they’ve provided support to a family member in the past 12 months.

Financial wellness is top of mind. Nearly 40% of participants report they’ve taken steps in the past twelve months to reduce debt and make other financial wellness decisions.

“This study shows that for financial firms who want to improve retirement savings outcomes must evolve their role from just account providers to trusted partners that people can turn to for help on holistic financial wellness,” NARPP says.
Data & Research May 8, 2018

Trust in Social Security Falters in 2018 Planning & Progress Study

About one in three Americans have less than $5,000 in retirement savings, and one in five have no individual private retirement savings at all, according to a new Northwestern Mutual study.

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Northwestern Mutual has published its 2018 Planning & Progress Study; this year the annual research report is subtitled “Living Long and Working Longer” and focuses on the sizable opportunities and challenges facing U.S. workers and their long-term financial security.

The underlying data set represents some 2,000-plus U.S. adults, including an “over-sample of 601 interviews with U.S. Millennials age 18 to 34.” Responses were weighted to be representative of the U.S. population based on Census targets for education, age, gender, race/ethnicity, region and household income.

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Across this broad group, nearly eight in 10 people say they are “extremely” or “somewhat” concerned about affording a comfortable retirement, and two-thirds of U.S. adults believe there is a real chance they will outlive their savings. At the same time, Northwestern Mutual reports, about one in three Americans have less than $5,000 in retirement savings, and one in five have no individual private retirement savings at all. The average amount of retirement savings reported came in at just about $85,000, which is far short of what most Americans can expect to pay for health care expense alone in retirement.

Thinking about the deeper future, three-quarters of Americans believe it is “not at all likely” or only “somewhat likely” that Social Security will be available when they retire. While nearly half of adults say they have taken no specific steps to prepare for the possibility of outliving their individual savings, 23% say they have recently increase the amount they save each month. Another 18% say they have put together a financial plan, nearly the same number who have purchased new investments (17%) or sought professional financial advice (17%).

Another point of concern in the data is the increasing number of Americans who anticipate retiring at 70 years or older than in the “traditional 65 to 69 range.” Within the group expected to work beyond 70, 55% suggest this will be due to necessity and 45% say it is their choice. Importantly, these figures contravene real-world statistics showing most people still retire in the 65 to 69 range, if not earlier.

According to the Northwestern Mutual survey, among the more than half of Americans expecting to work past the traditional retirement age by necessity, the main reasons were inadequate savings and a lack of confidence in Social Security’s ability to take care of their needs. Other concerns cited touched on rising healthcare costs or caring for loved ones.

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