Part Four: Post-Retirement Plans
THREE KEY TAKEAWAYS
- There is notable variability in participants’ expected retirement age and style.
- Most are concerned about outliving their money and unsure about how much they need to save for retirement.
- Many would welcome a post-retirement income option in their plan.
1. THERE IS NOTABLE VARIABILITY IN PARTICIPANTS’ EXPECTED RETIREMENT AGE AND STYLE
On average, surveyed participants expect to retire at age 65 (EXHIBIT 10). Digging beneath that average, however, shows how highly personal the retirement journey can be for each individual, with 24% expecting to retire at age 64 or younger, 34% at age 66 or older and 19% not sure. Near-retirees are more likely than those under 30 years old to expect to retire at a later age (67.7 vs. 61.3, on average). Compared with women, men are more likely to expect to retire under age 60 (13% vs. 4%). Participants who have been automatically enrolled are more likely to expect to retire slightly younger (64.0 vs. 65.3), as are those who have been automatically escalated (63.8 vs. 65.1).
The mean age when respondents expect to retire is 64.7, with 51% planning a gradual move into full retirement
EXHIBIT 10A: AGE THEY REALISTICALLY EXPECT TO RETIRE
EXHIBIT 10B: HOW THEY PLAN TO RETIRE
There is a similar range of differences when it comes to whether people expect to continue to work to some degree after they retire. Half plan to retire gradually by reducing the hours/days they work, 31% expect to stop working completely at a preset retirement date, and 9% plan to work seasonally or on a contractual basis (9% responded “other” or “not sure”). These responses show the wide range of potential income replacement needs as participants enter retirement and how these may evolve over time.
2. MOST ARE CONCERNED ABOUT OUTLIVING THEIR MONEY AND UNSURE ABOUT HOW MUCH THEY NEED TO SAVE FOR RETIREMENT
Nearly seven out of 10 respondents are concerned about outliving their money in retirement. Just less than half have calculated how much money they need to accumulate to last throughout retirement, and one-third are not confident about how to estimate how much they will have in their plan when they retire if they continue saving at the same level (EXHIBIT 11).
More than half of participants have not calculated a retirement savings goal
EXHIBIT 11: HAVE CALCULATED HOW MUCH MONEY TO SAVE TO LAST THROUGH RETIREMENT
3. MANY WOULD WELCOME A POST-RETIREMENT INCOME OPTION IN THEIR PLAN
A large majority of respondents (85%) say that they would likely leave their balances in their plans post retirement if there was an option to help generate monthly retirement income (EXHIBIT 12). This figure grows even higher for younger participants (91% for those aged 30–49, 86% for those under age 30).
As many as 85% would stay in their plans after retiring if there was an in-plan retirement income option
EXHIBIT 12: LIKELIHOOD OF STAYING IN PLAN AFTER RETIRING IF THERE WAS AN OPTION THAT USED SAVINGS TO HELP GENERATE MONTHLY INCOME
Our most recent Defined Contribution Plan Sponsor Survey found that 54% of plan sponsors believe that they have a responsibility to offer retirement income solutions to participants, and 47% identify keeping fees competitive by leveraging economies of scale as a main driver for keeping people in the plan. Of those who do not believe they have a responsibility, 52% say it is a personal decision best made by the participant. However, that is not what participants are saying: It appears that the vast majority would be comfortable staying in an employer-sponsored retirement plan after they retire if they were offered a retirement income investment option. Plan sponsors and financial professionals should consider:
- The participant and plan sponsor benefits of including an in-plan retirement income option.
- Leveraging advancements in technology and plan design that have made offering retirement income options more viable.
According to our most recent “Ready! Fire! Aim?” findings, the average participant withdrew more than 55% of their remaining plan balance in any given year at or soon after retirement. While there are any number of reasons they might do this, offering in-plan retirement income options could help encourage more systematic withdrawals and help complete the retirement plan journey by positioning participants for success during the decumulation period, just as plan sponsors and financial professionals have worked so hard to do for the accumulation phase.