In Practice November 10, 2011

Half of Participants Unattached at Retirement

Two market-research firms have found that more than half of defined contribution plan participants do not have a relationship with a financial adviser around the time of retirement.  
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In their third annual “2011 DC Participant Experience Study,” KK & Company and Greenwald & Associates concluded that retirement plan advisers and providers have ample opportunity for growth at the time participants retire. This opportunity has been created by a confluence of factors, the market-research firms found, such as:

  • Forty-five percent of participants plan to roll their account value to another company when they retire
  • Half (48%) have worked with a financial adviser on retirement planning.
  • Two-thirds (65%) do not have a written financial plan

“The main reasons for rolling money out is the relationship the participant has with another financial institution or adviser,” said Matthew Greenwald.

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The involvement of most participants in their retirement plan can best be described as reactive, the firms report. Sixty-seven percent only review the plan balance when it is sent to them and another 5% do not look at the communications they receive about the plan. Seventeen percent go online at least monthly to make changes, if needed.

In addition, the major increase in the number of participants who will retire with significant assets during the next decade is worthy of attention, the report contends. Near-retirees (ages 55-70) have more assets to invest than the “average” participant:

  • 21% have $50,000 to $149,000
  • 17% have $150,000- $249,000
  • 18% have $250,000- $499,000
  • 10% have more than $500,000

“According to U.S. Census Bureau data and projections, our old population pyramid is shifting rapidly,” says Kendall Kay, president of KK& Co. “In 2000, 32 million of the 320 million U.S. population were ages 55-69. By 2010, this segment had grown 50% to 47 million. This growth will continue and by 2020 the estimate is for 59 million people in this age band, effectively doubling in just two decades.”

KK & Company and Greenwald & Associates assert that there are five areas that could be enhanced for advisers and providers to maximize this opportunity:

1. Participant relationship management

2. Pre-retirement education and planning

3. Retirement income education and management

4. Development of new products that deliver dependable retirement income and guaranteed lifetime income

5. Enhanced Web site functions

Greenwald & Associates and KK & Company surveyed 1,000 defined contribution plan participants.  Respondents were at least 21 years old, employed full-time, and enrolled in their employer’s plan, regardless of whether they make contributions to the plan.   

 

Data & Research November 10, 2011

Millennials Most Confident about Benefits Decisions

Millennials are by far the most confident about their ability to make the right benefit decisions, according to The Guardian Life Insurance Company of America.
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Ninety-six percent of Millennials reported they feel “highly confident” versus 66% of Gen Xers and 64% of Baby Boomers.   

The survey also found nearly 80% of employees spend less than a total of two hours evaluating their insurance benefits options, including group medical, dental, life, and disability insurance.    

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Only 32% of all employees described their approach to open enrollment as one that incorporates a “careful review” of their benefits details and options. Millennials are more likely than their older co-workers to say they carefully enrolled in available benefits options (50% vs. 30% of Gen Xers and 31% of Baby Boomers).   

Yet, the research indicates that Millennials may be underinsured. A smaller percentage of Millennials (78%) are currently enrolled in available benefits as compared to their older colleagues (92%), particularly life (48% vs. 71%) and disability insurance (53% vs. 68%). 

While online benefits enrollment has become the new normal—with its use more than doubling in five years to 62%—many of the same communication and engagement challenges still persist, according to research from The Guardian Life Insurance Company of America. A majority of workers, regardless of age or life-stage, say they try to better understand their benefits options by reading their benefits materials (77%) and reviewing their prior year’s selections (66%); however, a minority reported that they have attended benefits meetings (37%), spoken with a benefits adviser (29%), used online planning tools (28%), or spoken with a carrier representative (14%) prior to enrollment.  

While some challenges continue, the research found that online enrollment can help improve employee perceptions of employer benefits communication and education efforts; 61% of workers who used an online benefits enrollment tool and found it to be a very easy process gave top ratings to their employers’ benefits education and communication efforts, compared to 35% of others.    

Full research results can be viewed at http://www.aboutemployeebenefits.com/reports/Research-Reports-Benefits-and-Behavior.html.

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