Market risk and longevity risk remain the main concerns of American workers: American Century Investments study
KANSAS CITY, Missouri, August 9, 2021 / PRNewswire / – More than a year after the recovery from the global pandemic began, market risk remains the number one concern for U.S. workers, new research from $ 240 billion* American Century Investments global investment manager.
The ninth annual study, composed of responses from 1,500 full-time workers aged 25 to 65, saving through their employer’s pension plan and grouped into categories of Baby Boomers, Gen Xers and Millennials, found examined their expectations, worries and regrets about retirement savings and the impact of the pandemic, according to Glenn Dial, senior U.S. retirement strategist.
“Market risk and longevity risk remain the main concerns of pension plans participants, “ Dial said. “This may explain why, when it comes to making withdrawals, 76% would be more likely to leave their money in their 401 (k) plan if they had a withdrawal solution in the plan.”
About two in three workers say they know how much to withdraw for living expenses, but only six in ten know how long they can make their money last in retirement. In addition, seven in ten say they need a “little bit of advice” on how to withdraw money from their retirement accounts.
“The good news is that three in four workers show at least some interest in holistic financial advice, which has important implications for finance professionals,” said Dial.
In terms of workers’ interest in environmental, social and corporate governance (ESG), more than half express an interest in having ESG investments as part of their retirement plan. Millennials and Generation X are the most interested; participants with incomes of at least $ 100,000 are also interested. Unsurprisingly, ESG is more attractive if the performance of investments is comparable, with 65% interest in this case, against only 6% even if the performance is worse.
“Since our first survey in 2013, employees have expressed considerable regret for not saving more or starting earlier,” said Dial. “We have found similar sentiments now, but employees are counting on employers to help them. From the progressive design of plans to their success, members value their retirement benefits.”
Expectations, worries and regrets
About three in ten workers expect a better standard of living in retirement, but four in ten fear they will run out of money. Many admit to saving less, especially in their first five years of work, with six in ten saying they saved less than they should.
Not saving more remains the biggest regret of participants, according to Dial. “We found that 35% of workers expressed this regret, which was more important to them than doing better in their career, doing better in their personal relationships or even doing enough to enjoy life. This clearly speaks to concerns about preparing for retirement. “
However, Dial noted that many workers – four in 10 baby boomers and 3 in 10 Gen X and Millennials – have counselors who could help them plan for retirement.
Ninety percent of plan members at least somewhat agree that pension plans are highly valued benefits; the participants most likely to strongly agree are men, those with a household income of $ 100,000 or more and those with assets of at least $ 500,000. Although four in ten people want a “kick in the pants” or “big push” to save more, baby boomers are more likely than Millennials and Gen Xers to want to be left alone.
Correspondence with employers is important to workers, according to Dial.
“Two in three people prefer an employer match to a salary increase, and eight in 10 would prefer a pension contribution rather than help with education costs,” he said.
The features of the automatic plan also intrigue participants. Two in three think businesses should have auto-enrollment with a 6% default rate, and just over 60% think employers should auto-enroll and increase it automatically every year. In addition, four in ten say that enrollment, contributions and default investments should be fully automatic for everyone.
Impact of the pandemic
“We were not surprised to see that after a year of the pandemic, participants are now more optimistic about savings, risks and expectations for the future,” said Dial.
Participants scored higher on retirement savings this year (an average of B-) compared to 2020 (C +) and 2019 (C-). Thinking about their future in retirement, men tended to be more enthusiastic about pursuing hobbies; women were more enthusiastic about traveling. Plus, paying off debt of all kinds, including long-term credit cards and student loans, is a lower priority this year than it was last year.
Concerns about risk have diminished somewhat from 2020. Concerns about surviving retirement savings have decreased by 5% (58% in 2021 compared to 63% the previous year); concerns about inflation and interest rate risk were reduced by 4%; worries about market risk were down 10%, as were worries about growth.
“In short, we have seen that investing for retirement is a priority for participants regardless of their age, that employers have a positive impact on asset accumulation, workers are now looking for help to withdraw assets and that optimism is on the rise, ”said Dial. .
American Century Defined Contribution-Only (DCIO) assets under management totaled $ 54 billion from June 30th, and assets under management at target date totaled more than $ 29 billion from July 31, 2021.
The survey of plan members was conducted between March 8 and 19, 2021. The survey covered 1,500 full-time workers between the ages of 25 and 65 who were saving through their employer’s pension plan. The data was weighted to reflect the makeup of key demographics (gender, income, and education) among all U.S. private sector participants aged 25 to 65.
Data collection and analysis were completed by Matthieu greenwald and associates of Washington DC
About American Century Investments
American Century Investments is a leading global asset manager focused on delivering investment results and building long-term client relationships while supporting cutting-edge medical research. Founded in 1958, the 1,400 employees of American Century Investments serve financial professionals, institutions, businesses and individual investors from offices located in new York; London; Frankfurt; Hong Kong; Sydney; Mountain view, California; and Kansas City, Missouri Jonathan S. Thomas is President and Chief Executive Officer, and Victor Zhang holds the position of Director of Investments. Delivering investment results to clients allows American Century Investments to distribute more than 40 percent of its dividends to the Stowers Institute for Medical Research, a not-for-profit basic biomedical research organization of 500 people. The Institute owns over 40 percent of American Century Investments and has received dividend payments from $ 1.7 billion since 2000. For more information on American Century Investments, visit www.americancentury.com.
* Assets under supervision at 07/30/21
A strategy or emphasis on environmental, social and governance (“ESG”) factors can limit the investment opportunities available to a portfolio. As a result, the portfolio may underperform or perform differently from other portfolios that are not focused on ESG investing. The ESG investment orientation of a portfolio may also lead the portfolio to invest in securities or industrial sectors that present different performances or maintain a risk profile different from that of the market in general or in relation to sub-securities. underlying assets that are not selected for ESG standards.
The return on investments and the principal value of investments in securities fluctuate. The value at the time of redemption may be greater or less than the original cost. Past performance is no guarantee of future results.
©2021 American Century Proprietary Holdings, Inc. All rights reserved
Contact: Laura Kouri
SOURCE American Century Investments