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RETIREMENT INSIGHTS

2021 BlackRock DC Pulse

Retirement continues to change and take on new meaning. The BlackRock DC Pulse Survey provides insights into the minds of plan participants, retirees and plan sponsors to measure that evolution.

For the past five years, DC Pulse has helped plan sponsors recognize trends in the industry and stay on top of the needs and concerns of participants. In the wake of COVID-19, it’s a timely lens into the mindset of savers and what they need going forward.

Workers saving for retirement today are concerned that they are going to outlive their savings, or that they may not enjoy the same kind of comfortable retirement previous generations did. Participants, plan sponsors and retirees alike all emerge from the pandemic with a sharpened focus on retirement security and the importance of retirement income. 

All plan participants polled for DC Pulse were employed full-time and had access to a workplace retirement plan at the time of the survey. Meanwhile, 57 million Americans don’t have access to one. Over the course of the pandemic, millions of people were laid off, furloughed, took loans from the plans that they did have, or were impacted in other ways that affected their ability to save.

When it comes to retirement savings, it isn’t always an even playing field, but we can improve. The knowledge we gleaned from the DC Pulse survey can inform and help everyone as we move forward. Coupled with potential changes in retirement policy, we can use this information to help build better retirements.

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Building more secure financial futures

The need for retirement income was magnified by COVID-19. Participants worry about generating income in retirement and note it would be helpful to know they would have some while they plan for retirement.

Plan sponsors are beginning to respond with solutions that could offer a more holistic approach to financial planning and education for employees.

Spotlight on income shines bright

Participants find funds that converts to guaranteed income appealing and say guaranteed income in retirement would positively impact their current well-being.

77% of participants are looking for help to get through retirement, not simply reach it. It should be no surprise, then, that 81% of participants said it would be helpful if their employer provided secure income generating options in their workplace plan.

The focus on income is only magnified by COVID-19. In light of the pandemic, 37% of participants are more interested in owning a product designed specifically to generate income in retirement.

Emergency savings builds a strong foundation

Over half of participants would save more for retirement if they had an emergency fund.

Plan sponsors are committed to helping improve the holistic well-being of employees, and emergency savings is top of mind.  A lack of emergency savings can hold participants back from realizing their retirement goals, and from achieving positive well-being.

56% of participants say they would save more for retirement if they had an emergency savings fund set aside. And nearly half of participants say that when they feel confident about their short-term finances, it makes them feel more confident about their long-term finances.

Retirees recognize the benefit

76% of retirees say secure income makes a bigger difference in retirement than they thought it would.

Those already retired have greatly benefited from access to guaranteed income when available. 67% of retirees feel confident they have enough money to last throughout retirement because they have a pension or other source of income, which was the most common reason.

An even larger percentage, 76%, say it even makes a bigger difference than they thought it would.

Sponsors answer the call

96% of sponsors feel responsible for helping participants generate and/or manage their income in retirement.

Sponsors see the important role that secure income plays in retirement. 86% agree that their plan participants would benefit from a target date fund that has a feature that generates guaranteed retirement income. Interest in income products is rising, and forward-thinking sponsors are already adopting them. 82% of sponsors that do not currently offer a specific retirement income product are likely to add one in the next 12 months.

Building on what’s working

Participants largely feel on track with saving for retirement, underscoring the importance of access to workplace plans. That’s not to say the pandemic didn’t have an impact on sponsors and participants, who are both adapting to the changing environment.

On track despite tumultuous year

87% of participants said they feel positive about their current, overall well-being this year.

68% of participants report they are on track with their retirement savings, in line with levels in 2020 before the pandemic and maintaining momentum from 2019, when 60% felt on track. This is significant considering nearly 9 in 10 participants agree that being on track for retirement has positively impacted their overall well-being.

However, 47%​ of participants say that the pandemic has had some negative effect on how on track they are with saving for retirement. Unsurprisingly, those who did not feel like they were on track were disproportionately impacted by the pandemic -- 54% said COVID-19 set them back with saving for retirement compared to 36% of participants who were on track.

Trust and responsibility

96% of sponsors feel both responsible for the overall financial well-being of their employees and for their retirement preparedness.

401(k) plan sponsors emerged from the test of market volatility cautiously optimistic about their retirement plans, believing more than ever that they have a duty to help improve the financial well-being of participants. Even with high participant confidence, sponsors are on the lookout for potential concerns that may be undetected.

Attuned to needs

68% of plan sponsors say helping participants with their retirement income is more important due to COVID-19.

More than half of plan sponsors who keep track of short-term 401(k) loan withdrawals said employees used their 401(k) for emergency spending needs during 2020.

61% of plan sponsors say at least half of their employees were negatively affected in terms of their retirement readiness by the pandemic. This number may be larger than what participants report, since plan sponsors have a broader, data-driven view, offering a window into more of the negative effects of COVID-19.

Coming out of the pandemic, improving retirement savings is top of mind for both participants and plan sponsors. 37% of plan sponsors cite the impact of COVID-19 as the most important factor when considering changes to their plan.

Hunting for better outcomes

Convenience, auto-enrollment, and access to professional management appeal to retirement savers when it comes to considering solutions. That may be a large reason why target date funds continue to grow in popularity. However, more knowledge and adoption is encouraged to improve the participant experience.

Participants trust the target date fund

68% of participants agree that it would be helpful if their employer automatically reallocated their assets to more age-appropriate investments.

Target date funds are a time-tested, reliable way to build retirement savings. They aren’t just the default option either. 40% of participants reported that the reason they invested in a target date fund is because they like the convenience and access to professional management.

Sponsors recognize the benefits of active management and alternatives

20% of participants say it is extremely important to select the lowest fee product when selecting investments, compared to 30% that look for options that offer the most growth.

There is strong belief among plan sponsors that active management can increase returns and reduce the impact of volatility. 8 in 10 agree that active strategies can get better returns than index, and that active managers can consistently outperform the market.

When it comes to alternatives, 32% of sponsors who do not already offer them say they are considering adding them to their investment line-up in the next 12 months. Sponsors are offering the strategy so participants can potentially receive high levels of income and have means to increase diversification.

This is timely insight as participants are interested in investment options that offer the most growth over other factors like fees.

ESG interest is on the rise

73% of participants think it is important to have ESG investing options, up from 62% in 2019.

73% of participants think it is important to have ESG investing options. That belief is especially strong amongst Millennials, 49% of whom say it’s very important. Participants remain confident that the strategy can deliver them better risk-adjust returns. 78% agree that companies focused on making a positive impact on the environment and their community will perform better in the future.

Divergence across demographics

Women are more likely to say they are unsure if they are on track for retirement and are less trusting of their employers when it comes to how to invest their savings for retirement.

Meanwhile Boomers, Gen X and Millennials are all concerned they won’t experience the same levels of comfort in retirement as previous generations.

Gender differences in retirement savings

45% of women trust their employer to help determine how they should invest compared to 67% of men.

Women were more likely to say they were unsure if they were on track for retirement and were less trusting of their employers when it came to how their money should be invested.

59% of women felt that they were on track, compared to 78% of men. This is coupled with concerns about outliving their savings – where 64% of women are worried, compared to 55% of men – and less awareness of tools to help them invest. It reinforces the gender retirement savings gap that we know exists.

Diverging optimism

76% of Millennials and 68% of Gen Xers believe their generation won’t have the same retirement income as past retirees.

Younger generations remain concerned that they won't experience the same comfort in retirement as previous generations. Gen X lags the most, with 25% unsure, more than any other generation. This is compared to 22% of Boomers and 16% of Millennials.

When it comes to the effects of the pandemic, those closest to retirement seemed to be the least impacted. 79% of working Baby Boomers disagree that hardships related to the COVID-19 pandemic set them back with saving for retirement, compared to 38% of Millennials.

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