Turmoil Dents Participant Confidence

April 7, 2009 (PLANSPONSOR.com) - It should come as no surprise to discover that nearly two-thirds of surveyed participants say their retirement confidence has declined in the past twelve months.

Indeed, half of surveyed participants said that the recent financial turmoil has "caused me to think a lot more about my retirement income," according to a new study sponsored by BGI, and conducted by Boston Research Group.

However, the online study, "401(k) Participant Attitudes, Behavior, and Intentions," based on the results of a survey conducted in March 2009 by The Boston Research Group of a thousand current 401(k) plan participants, found that the greatest impact on retirement confidence was among participants who were already concerned about their prospects. In fact, two-thirds of participants who were previously confident that they would have enough to live comfortably say their confidence level was unchanged, and 18% said their confidence had actually increased.

On the other hand, among those who were already "worried I'll never be able to retire", 85% said that that level of "confidence" had decreased, while only 13% said it was unchanged, while 83% of those who previously had said they were "not so sure how" they would make ends meet in retirement said they were now even less confident (14% said that was unchanged). However, among those who had been "somewhat confident", 57% said that confidence had declined, compared with 38% who said their confidence level was unchanged (5% said they were now more confident). The study made no attempt to correlate participant confidence with their actual level of savings and/or preparation.

"Horror Movie"

That declining confidence has apparently had an impact on participants' willingness to look at their statement, with 33% saying that they had put off looking at those reports. Once again, the confidence level played a role in what Boston Research Group founder Warren Cormier called the "horror movie" syndrome, which he described as a situation where participants effectively covered their eyes, and only snuck a peek at their statements through their fingers if they anticipated bad news. Nearly half of the "worried I'll never be able to retire" group said they had put off looking at those statements - and even more than one-in-five (22%) of the confident group had done so as well.

That trend has additional negative implications Cormier told attendees at the BGI event, noting that participant statements are one of the most critical means not only of getting participants' attentions, but also motivating them to take action. "We know behaviorally that lack of communication tends to significantly raise fear," he said.