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Defined Contribution (DC) Plan participants want more help managing their financial lives. Specifically, they want greater access to professional guidance, as well as employer-supported financial wellness initiatives.
These are among the key findings of J.P. Morgan’s 2024 DC Plan Participant Survey, our annual study of how plan sponsors and participants are navigating the retirement landscape. Alex Nobile, Retirement Strategist, reviews highlights of the survey in this issue.1
Current state: Plan participants are on their own
Today, a sizeable number of plan participants rely on their on their own research to make financial decisions on everything from budgeting to investing to planning for retirement/long-term goals. Moreover, the number of participants flying solo has actually grown in size in recent years.
The number of participants relying solely on their own judgement is even higher when it comes to day-to-day financial decision making:
- 80% make budgeting decisions based on their own research
- 73% make short-term financial decisions unaided
Also worth noting: Four in 10 survey respondents told us they lack basic emergency savings—which our related research has found can lead to higher credit card debt and lower retirement savings balances.
Desired state: More support from plan sponsors
The 2024 survey revealed participants’ growing uncertainty about achieving security in retirement: Only 43% were confident their savings would last their lifetime—down from 57% in 2021.
This, along with global market volatility, may help explain why 75% of survey participants are eager for employers to provide more guidance from financial professionals (even though many participants are defaulted into investments in their DC plans).
Financial wellness programs, too, are much in demand, with nearly nine in 10 participants finding them valuable. This interest is abetted by passage of the SECURE 2.0 Act of 2022, which showed clear support for these types of programs, including provisions for student loan matching contributions and in-plan emergency savings programs.
Indeed, 85% of the plan sponsors we surveyed acknowledged feeling a very/somewhat high sense of responsibility regarding their employees’ financial wellness.
However, some plan sponsors that have opted to provide these programs fear the employees that most need this type of support are not taking advantage of it. Similar concerns may dissuade other plan sponsors from stepping into the financial wellness arena.
Retirement income support is also of particular interest to participants:
- Nearly eight in 10 respondents expressed concern about creating a steady stream of income in retirement that would last their lifetime, with 56% noting that they haven’t calculated how much they need to save.
- Notably, nine in 10 respondents expressed interest in an in-plan solution that would provide guaranteed income in retirement.
Clearly, participants want more support with all stages and components of their financial lives and employers are well-positioned to help.
Four ways to move forward
There are many ways to engage participants in financial wellness initiatives. Here are four approaches to consider:
1. Survey participants to gain insights into where they would like support. Participating in the development process can help employees feel more heard and supported—and increase the likelihood they will take advantage of any programs offered.
2. Focus on developing programs that can have an immediate impact on employees’ finances, such as:
- Emergency savings accounts (either within or outside the plan)
- Coaching/priority setting for savings goals, including retirement
- Debt consolidation education and coaching
- Student loan debt-matching; i.e., saving for retirement/other financial goals, such as buying a home, while simultaneously paying off education debts
3. Default plan participants into financial wellness programs to increase engagement and consider offering in-plan solutions that provide lifetime income in retirement.
4. Develop a robust communications program to support a program rollout and follow up with targeted communications to specific employees according to their characteristics/behaviors: for example, promote emergency savings coaching to employees who borrow from their 401(k).
Employers can amend plan documents, if need be, before begin rolling out initiatives. Also, be sure to set usage goals and track progress over time to measure success. Revisit communication approaches if initial efforts don’t produce desired results.
In summary: A win-win outcome is possible
Helping employees improve their financial wellness is a proven way to strengthen retirement outcomes and, as our survey confirms, it’s something that employees very much want. Additional benefits like these can help employers to attract and retain talent, so it’s beneficial for both employees and employers.