DEFINED CONTRIBUTION

Inside the minds of
401(k) participants

The 2017 BlackRock DC Pulse Survey

Retirement confidence is on the rise. But many 401(k) participants are not aware of – or prepared for – the industry-forecasted period of low returns. Fortunately, small but effective measures by both plan sponsors and participants can help bridge the savings shortfall.

Defined Contribution pulse bubble

Confidence grows…

Compared to last year’s survey, more 401(k) participants feel “on-track” for retirement. In part, this is because recent investment performance has been
relatively strong, helping more participants feel like they’re saving enough.

 

Increase in retirement savings confidence

Increase in retirement savings confidence from 2016 to 2017

Increase in optimism about retirement

Increase in optimism about retirement in the past year

Increase in participants confident

Increase in participants confident they’re saving enough to get the retirement income they want

But is it warranted?

The trouble is, participants may incorrectly assume that current market conditions are a predictor of things to come. In other words, participants are expecting a level of returns that might not happen. In fact, most are unaware of the forecasted period of low returns. And, when confronted with the forecast, their confidence takes a hit.

Stats for participants' confidence
Piano
Participants' expectations stat
Sitting reading
Participants' confidence drop stat
Parachute

 


Get participants back on track

Participants believe they need more support from their plans to navigate this new
low return environment. Fortunately, there are ways to enhance savings rates and implement design and investment changes to help participants boost their chances of success.

1. Drive increased savings

When faced with an extended period of lower returns, most participants would rather save more than work longer to make up the difference. In fact, 48% of plan sponsors and participants agree that saving more is the main step they would take to tackle low returns.

To encourage greater savings, consider the following action steps:

Plan design tools.

Maximize plan design tools – including auto features and re-enrollment – to improve participant outcomes.

Strategic communications.

Tailor strategic communications to participants at different life stages with relevant messages – from encouraging them to start saving to showing them how much income they can generate in retirement.

Restructure the company match.

Restructure the company match and consider additional contributions to help manage the effects of reduced future returns.

2. Quality check the target date fund

Participants want their retirement savings plan to allow them to maintain their standard of living in retirement.

 

Stat for the purpose of retirement savings

believe the purpose of retirement savings is to enable their current spending in retirement

Stats who expect at least moderate growth

expect at least moderate growth from their DC investments

Stats of pre-retirees

of pre-retirees (ages 55-65) prefer investments that limit losses in down markets

 

These are goals that target date funds are well-suited to deliver. But not all target date funds are the same. Evaluate whether yours matches participant needs and
plan objectives.

Fund's objective and implementation.


Review the fund’s objective and implementation.

Evaluation of the fund.

Evaluate whether the fund is sufficiently diversified – and consider
custom solutions.

Glidepath's maximum equity level.


Reconsider the glidepath’s maximum equity level and how long to hold it.

Manage volatility.


Effectively manage volatility as participants near retirement.