A secure financial future and peace of mind are two of the benefits sought by DC plan participants. But our new DC Participant Insight Series report finds an emerging pessimistic attitudinal outlook among older participants regarding their financial situations.
Overall, a majority of DC plan participants reports that their financial situation today is better than it was one year ago (58 percent) and that they expect it to be stronger one year from now than at present (68 percent). But Financial Behaviors and the Participant’s Mindsetfinds a divide between the generations on this question. Baby Boomers and World War II generation plan participants are not as likely as Millennials and Gen Xers to report that their financial situation is better today than it was one year ago. Similarly, Millennials are much more likely (84 percent) than Gen Xers and Baby Boomers (64 percent each) to forecast a better personal financial situation one year from now than at present, and almost twice as likely as World War II generation investors (43 percent).
Being able to retire when they want is a concern to nearly six-in-ten of Millennials plan participants (56 percent) and Baby Boomer participants (58 percent). It is of especially heightened concern to Gen Xers (70 percent).
And while roughly two-thirds of Millennials and World War II generation investors fully expect to have sufficient income to live comfortably during retirement, less than half of Gen Xers and Baby Boomers (39 percent and 46 percent, respectively) share their rosy outlook. Compared to other generations, Baby Boomer plan participants comprise the largest percentage of those concerned about either themselves or their spouse being forced into retirement before they are ready (37 percent, vs. 32 percent of Gen Xers, 29 percent of WWII generation investors and a mere 9 percent of Millennials).
“One of the tenets of the American Dream is being able to retire on one’s own terms and that the children of the family will be better off when they reach their parents age,” observes Spectrem Group President George H. Walper, Jr. “Older DC plan participants are not as confident about their financial futures. Financial advisors and plan providers need to develop resources and reach out and assist them in assessing their retirement planning effectiveness.”
Our report acknowledges that the changing role of the retirement plan provider. “Because of their access to plan participants,” it states, “they need to accept the role of educator and communicator for retirement savings.”
But as older plan participants, especially, indicate, saving for retirement is just one of their underlying concerns. “Financial advisors and plan providers need to expand their roles to provide a more holistic understanding of the entire retirement process…and find new and influential ways to educate plan participants about various types of investment and how those investments relate specifically to each participant and his or her future,” our report states.
Beyond investments, financial advisors and providers also need to take a broader view of the breadth and depth of retirement planning challenges including health care costs, a heightened concern among older participants who fear these escalating costs could deplete their retirement savings. Reducing their tax burden in retirement is another financial challenge on which older plan participants are focused.