Study at a glance
Plan member research
Show me the income: Executive Summary
Transcript
Our 2022 Retirement Income study reflects on the evolving retirement industry today as it faces the pressing need to help participants turn their DC plan savings into long-term retirement income.
Together with Greenwald Research, we connected with 118 plan sponsors and consultants and over 1,000 DC plan participants in the US (all working for large employers with more than 5,000 employees) through online surveys, in-depth interviews, and virtual focus groups.
Due to the global turmoil over the last few years, there’s been a shift in how employees define retirement, and how best they can prepare both mentally and financially. We found there’s an opportunity to provide participants retirement income-specific planning tools, investments, distribution options, and communications designed to help.
In our first finding, we learned that most plan sponsors recognized the importance of helping participants ease the transition from saving to income in retirement. First, by letting participants know they have the option to stay in the plan when they retire, and second, by offering retirement income solutions within the investment menu along with flexible distribution options.
While half of plan sponsors surveyed encouraged participants to stay in plan at retirement, more work needs to be done to generate awareness.
In our second finding, participants often had two intertwined fears First, outliving their retirement savings, and second, spending too much, too soon.
Only 22% were very confident they could create a retirement income strategy on their own. Which includes determining how much of their retirement savings to withdraw, when and from which financial source.
We also found that participants wanted a reliable income stream to cover their expenses with the flexibility to withdrawal funds as needed – without running out of money along the way. They didn’t know what type of retirement income solutions could achieve this.
Yet when asked, participants felt both guaranteed lifetime income solutions and non-guaranteed monthly income withdrawal solutions would be a good fit for them, in different ways
In our fourth finding, we uncovered that few participants would put all their DC plan savings into just one retirement income solution. 90% of participants preferred two to three choices that included a guaranteed and non-guaranteed option.
Regardless of how many in-plan solutions were offered, eight in 10 participants wanted help choosing which solution would best fit their personal situation.
Finally, we found that three quarters of participants were eager for their employers to start the retirement income conversation earlier.
While 78% of plan sponsors reported they provided specific retirement income generation communications, only 38% of participants reported they received those communications.
As participants rely on their DC plan as their largest income source in retirement, plan sponsors have a significant opportunity to help participants of all ages along their planning journey.
Request our white paper to view a complete checklist with detailed action steps for plan sponsors.
To learn more about the findings of our 2022 DC retirement income research study, visit our website or contact your Invesco DC professional.
FOR INSTITUTIONAL USE ONLY
In Canada, this material is restricted to accredited investors as defined by National Instrument 45-106. This material is provided to you for informational purposes only and may not be distributed or shared with others.
Cited Invesco research is based on Invesco’s work with Greenwald Research. Invesco is not affiliated with Greenwald Research. Participant quotes are used with permission.
This information was prepared for US investors and may contain information that may be materially different for Canadian investors. These differences may affect suitability for Canadian investors, and these materials should not be relied upon by Canadians in making any investment decisions. This material is provided to you for informational purposes only and may not be distributed or shared with others. The information provided is general in nature and may not be relied upon nor considered to be the rendering of tax, legal, accounting or professional advice. Readers should consult with their own accountants, lawyers and/or other professionals for advice on their specific circumstances before taking any action.
This material is for illustrative, informational and educational purposes only. If the illustrations herein are used outside of the designated audience, it is the respective user’s responsibility to ensure that such material complies with all applicable regulations and is filed with the appropriate regulatory bodies if so required. Words and phrases utilized should always be appropriate, applicable and provable. We make no guarantee that participation in this program or utilization of any of its content will result in increased business or higher participant rates.
The opinions expressed are subject to change without notice. These opinions may differ from those of other Invesco investment professionals. This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
Annuities can be purchased within or outside of qualified retirement plans and traditional IRAs. Annuity benefits and features vary, so an investor should carefully consider whether this product is right for them. Some benefits may incur additional costs. Any guarantee associated with an annuity is subject to the claims-paying ability of the issuing life insurance company. Invesco does not offer Insurance products. All investing involves risk, including the risk of loss.
This is not intended to be legal or tax advice or to offer a comprehensive resource for tax qualified retirement plans. Any products referenced are not intended to represent any specific Invesco products.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions. As with all investments, there are associated inherent risks.
The opinions expressed are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
Invesco® and all associated trademarks are trademarks of Invesco Holding Company Limited, used under license.
Invesco.ca/retirementincome Published 11/2/22 NA 2569236 2022 Invesco Canada Ltd. All rights reserved.
The retirement industry today is evolving as it faces the pressing need to help members turn their defined contribution (DC) plan savings into long-term retirement income. To help plan sponsors navigate the shift for their respective plans, we explored how members think about retirement income in general, what type of in-plan solutions may be most attractive to them (and why), and which resources would best resonate across a wide range of employee demographics. We also examined how member and plan sponsor mindsets differed at times to see how best to bridge the (savings to income) gap moving forward.
Sponsors wanted more information and guidance before adding any new retirement income solutions to their menu, especially one with an insurance-based guarantee. Most sponsors, especially those who preferred members stay in the plan – were very aware of the need to evolve their retirement programs to accommodate the growing wave of near-term and current retirees.
However, members clearly wanted more information and guidance today from plan sponsors to help them plan for – and ultimately create – their personalized retirement income strategy. They believed their DC plan would be their largest retirement income source. Lacking confidence, with many fearing that they could outlive their savings, they wanted sponsors to help make their long-term retirement income plan a reality.
In the Executive Summary, we highlight our key research findings:
- Members were open to stay-in-plan at retirement if they were offered specific investments to help them create a regular stream of retirement income.
- Offering auto-enrollment into a retirement income solution is one strategy to create consistent (monthly) income and potentially lessen member's fears about running out of money.
- Members saw the potential advantages of monthly income withdrawal solutions (non-guaranteed) and guaranteed lifetime income solutions to help achieve their retirement goals.
- Being able to choose from at least two in-plan options that would provide the reliability of steady income and the flexibility to make changes as needed is ideal.
- Frequent communication and online comparison tools are game changers.
About the study
Invesco teamed up with Greenwald Research to conduct the research from March 2021 through April 2022. The extensive study spanned online surveys of 100 plan sponsors and over 1,000 members (all working for large US organizations with 5,000 or more employees), 12 member focus groups, and 18 in-depth interviews with plan sponsors and consultants.
Learn More
Related Insights
Plan member research Give me reliability and flexibility
In our research, we found plan members wanted the feeling of control with the ability to choose from a range of retirement income solutions.
October 18, 2022
Plan member research Overcoming fear and inertia
In our research, we found that a primary financial goal for almost all member's DC plan savings was to maintain their pre-retirement lifestyle.
October 18, 2022
Plan member research Bridging the (income) gap
In our research, we better understand how much money plan members actually need at and later in retirement to achieve their retirement goals.
October 18, 2022
Get the full white paper
Our latest defined contribution research reflects upon the evolving retirement industry today as it faces the pressing need to help plan members turn their DC plan savings into long-term retirement income. We connected with over 100 plan sponsors and 1,000 members to better understand their preferences for creating retirement income and what features, resources, and approaches to communications resonated across the generations.
