Overcoming fear and inertia

Our 2022 retirement income study focused on plan sponsor and participant preferences for turning defined contribution (DC) savings into retirement income. We teamed with leading research firm Greenwald Research on an extensive study involving connecting with 100 plan sponsors and consultants and more than 1,000 participants (all working for large US organizations with at least 5,000 employees) through online surveys, in-depth interviews, and virtual focus groups­.

A primary financial goal for almost all participants’ DC plan savings was to maintain their pre-retirement lifestyle. However, as participants shift from years focused on saving for retirement, the concept of outliving their savings and withdrawing too much, too soon is incredibly concerning.

Because participants primarily fear running out of money in retirement while desiring help from their employer, eight in 10 favorably viewed being automatically enrolled into a retirement income solution with the ability to opt out without penalty when notified. Fortunately, participants are becoming familiar and comfortable with auto-features, such as automatic enrollment and auto-increase.

Regarding participants creating a sustainable withdrawal strategy on their own – one that wouldn’t run through their savings too quickly – many of them feared they wouldn’t be able to determine exactly how much income they would need, when they would need it, and from which financial source to tap first. Only 22% of participants were very confident they could create a strategy that could turn their savings – across multiple retirement sources – into a long-term income stream they won’t outlive.

Plan sponsors have an opportunity to quell some participants’ fears. When communicating with participants, consider using language highlighting the personal and plain-spoken benefits auto-enrolling features that make it seamless for participants to create consistent (monthly) income and emphasize an opt-out option. Continue promoting the retirement income solutions (guaranteed and non-guaranteed), resources, and tools available to help participants create and adjust their retirement income strategy.