Part 3: Streamlining investment decision-makingContributors Catherine Peterson, Anne Lester
MANY PARTICIPANTS WOULD RATHER LEAVE RETIREMENT INVESTING TO PROFESSIONALS
As seen in Part 1 of our series, 2018 Defined Contribution (DC) Plan Participant Survey Findings, less than 40% of participants are highly confident in their ability to make key investment decisions and many are not fully engaged in monitoring their 401(k) accounts.1 In fact, the majority want the help of an expert in managing retirement assets, but most still stop short of wanting employers to choose their investments for them (EXHIBIT 1).
We saw in Part 2 that strategies to improve savings rates need to provide the right balance between employer encouragement and participant choice. A similar statement can be made about this article’s focus—strategies designed to streamline investment decision-making (such as target date funds [TDFs] and re-enrollment). Streamlining need not mean taking ultimate control of investment decision-making out of participants’ hands.
TDFs have gained popularity among participants and are the qualified default investment alternative (QDIA) of choice among plan sponsors. Using QDIAs such as TDFs in conjunction with automatic enrollment and re-enrollment strategies has the potential to motivate saving and simplify investing—for both new and existing participants.
Yet re-enrollment has had a slower uptake among plan sponsors, despite participants’ generally favorable views and high levels of satisfaction with these strategies. We look at participants’ perspectives alongside those of plan sponsors and examine possible misperceptions that may be tempering the adoption of these strategies.
Many want the help of an expert in managing their 401(k) investments
EXHIBIT 1: TO WHAT EXTENT DO YOU AGREE OR DISAGREE WITH THE FOLLOWING STATEMENTS? (% RESPONDING “SOMEWHAT AGREE” OR “STRONGLY AGREE”)
12018 DC Plan Participant Survey Findings—Part 1: Understand the state of the participant..
2See 2018 DC Plan Participant Survey Findings—Part 1 for definitions of “do it for me” and “do it yourself” investors.
3J.P. Morgan retirement research 2017.
4J.P. Morgan Plan Sponsor Research 2017.
72018 DC Plan Participant Survey Findings—Part 1: Understand the state of the participant.
8J.P. Morgan retirement research. Representative sampling of 3,000 self- allocating participants; appropriate equity exposures defined as within a 10% range over or under the J.P. Morgan target date glide path. Data as of December 31, 2017.
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