More Retirement Plans Expected to Offer SRI Options

The number of defined contribution (DC) retirement plans offering a sustainable and responsible investing (SRI) choice could double in the next two to three years, according to Mercer.

Titled “Opportunities for Sustainable and Responsible Investing in US Defined Contribution Plans,” the study found 14% of 421 DC plan sponsors that responded to Mercer’s survey already offer one or more SRI options, while an additional 13% are either considering an SRI option or intend to add one in the next two to three years. 

The US SIF Foundation/Mercer report also finds that more than four out of five plan sponsor respondents (84%) — both those that currently offer SRI options and those that do not — predict that demand for SRI options in retirement plans will increase or remain steady over the next five years.  

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“Today, more and more Americans rely on defined contribution (DC) pension plans for their retirement, and it is clear that SRI options are going to be a bigger part of that picture,” said Lisa Woll, US SIF CEO. “Investment flows to DC plans tend to be steady during market downturns, making DC plans an important retirement tool for many workers. The retirement industry regularly analyzes the overall investment composition of DC plan assets; however, plan sponsors and participants have had little concrete information about the availability of sustainable and responsible investing options. This year, the US SIF Foundation determined a new survey was needed to fill in that information gap, particularly given the significant growth in SRI, tumult in the financial markets and changes in the DC retirement industry over the last five years.”

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Key findings in the report include:

  • For those plan sponsors that currently offer SRI options, the primary reasons for doing so are to align their plans with their organizational missions and to meet employee demand.
  • Nearly three in five respondents (58%) say they have minimal or no understanding of SRI investment products and indices.
  • Whether a plan sponsor offers SRI options bears little correlation to the plan’s size, either by value of assets or number of participants. Rather, it appears that SRI options are most likely to exist where the philosophy is aligned with an organization's objectives and culture. SRI options are more likely to be found in the plans of non-profit, mission-based, or public organizations than in corporations.
  • Even though staff and participant demand is cited as one of the primary reasons for adding an SRI fund option, more than 70% of the plan sponsor respondents that do not offer such options say they believe that SRI options have never been requested by participants. (The survey did not ask plan sponsors whether they had a formal way to elicit or track participants’ potential interest in SRI or other options.) 
  • A small subset of respondents say they do not offer SRI options, but have received participant requests for them. These plan sponsors say the primary reason they have not added SRI options—cited by just under one-quarter of the subset—was that the requests from participants have not reached a sufficient level.  Somewhat lesser concerns—cited by under one-fifth of this group—were questions about fiduciary duty and financial performance.

The full US SIF Foundation/Mercer report is available at http://www.ussif.org/resources/pubs/.

Study Finds Inadequate Retirement Planning by Women

A MetLife study shows women who "take charge" of their finances are more likely to have a secure retirement than those who shy away from the process.

The MetLife study, “Women, Retirement, and the Extra-Long Life: Implications for Planning,” shows women who take charge, do the math, plan for contingencies, and work with their partners and/or financial advisers have a better chance of securing their finances in retirement than those who shrink from the process.

Female participants in the study generally expect to live until age 85, some until age 90 (39%), and are more concerned than men about affording health care, long-term care, and outliving their assets. Yet, slightly more than half of the women surveyed know the likely amount of their retirement income/assets and only 44% have calculated the amount of their essential expenses. Approximately one-in-six (16%) reported that they have or plan to delay retirement, on average, four years.  

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Women expect to retire at about the same age as men.  have retired or expect to retire at age 62 on average, but with longer life expectancies. Women in the study can expect to have retirements 16% longer than those of the men (22 years vs. 19 years). Retirement timing is not always predictable or controllable. Nearly one in four women (23%) experienced a change in their planned retirement age, 16% retiring later than expected and 7% earlier than expected.  

Seven out of 10 women (71% vs. 62% of men) say they are either very or somewhat concerned about being able to afford health care in their retirement years. Seven of 10 women (71% vs. 63% of men) report being either very or somewhat concerned about providing for their own or their spouse’s long-term care needs and are nearly twice as likely as men to be very concerned (27% vs. 15%).  

More than half of the women (54% vs. 44% of men) report that they are very or somewhat concerned about outliving their retirement resources.  Of women who were at least somewhat confident about their ability to live comfortably in retirement, 66% attributed this to having a guaranteed stream of income (70% of men concurred). Of those not confident, 61% of women cited not having sufficient savings to last their anticipated lifetime (58% of men agreed).

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How Women Plan  

Only one in three women (34%) said they are most responsible for financial and retirement planning in their households, compared to six in 10 men (61%). Seven percent of women said they were not at all responsible for retirement planning and decisions, and only two men in the entire sample said the same.More than half of women (53%, and an equal percentage of men) respond to unexpected financial emergencies by dealing with them “if and when they happen” as opposed to planning for possible scenarios and contingencies.  

Almost six in 10 women (58%) spend fewer than ten hours in information gathering or planning over a six-month period, compared to 45% of men. There are gender differences in the use of other resources. Women are far more likely than men to consult with their spouses/partners (55% vs. 37%) and/or with other family members (15% vs. 9%). Women are less likely than men to use the Internet or other calculation tools or media publications. More men than women rely on their own calculations (65% vs. 51%).  

Slightly over half of women (55%) have estimated retirement income, compared to two-thirds of men (65%). Less than half of women (44%) have estimated retirement expenses (compared to 58% of men). Only one-quarter of women (25%) and fewer than one-third of men (31%) have estimated long-term care and health costs.Just under one-third of women either have only a vague notion of their retirement income and expenses or have not done any calculations or estimates at all, compared to one-fifth of men.  

More men than women (34% vs. 28%) report getting serious about retirement income and expense decisions/calculations in their 20s and 30s. About one-third of men and women (32% and 36%) got serious in their 40s. One in three men (32%) and over one in four women (28%) did not get serious until their 50s and 60s.  One in three men (32%) and just under one in four women (23%) indicate that they would have started saving sooner. About one in 10 men (9%) and one in six women (17%) report that they would have saved/invested/contributed more.

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Couples Planning  

An equal number of men and women (91% and 92%) indicated they “see eye-to-eye” with their spouses/partners when it comes to retirement financing. The vast majority (84% of men and 89% of women) also report that they make retirement financing decisions together.  

Over half (55%) of the confident vs. just over one-fifth (22%) of the not confident agree strongly that they see eye-to-eye with their spouses or partners. Over half (56%) of the confident vs. under one-third (30%) of the not confident agree strongly that they make decisions together.  

The report can be downloaded from http://www.metlife.com/mmi/research/women-retirement-extra-long-life.html.

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