Fifty-two percent of participants surveyed by J.P. Morgan expect to be able to retire at their ideal retirement age, and the same percentage somewhat or strongly agree that their savings will last throughout their lifetime, up from 41% and 44%, respectively in 2016.
However, despite the increase in confidence, only 40% are very or extremely confident they know how much to put into their defined contribution (DC) retirement plan to be on tract to reach their retirement goals. Only 39% are very or extremely confident in estimating how much they will have in their plan by retirement age if they continue investing at the same level, and only one-third (34%) expressed the same confidence in knowing how much monthly income their savings will provide in retirement.
Seventy-three percent of participants think they should be saving 10% or more to be on track for a secure retirement, but 70% are falling short on that savings target.
Guidance on saving
Nearly six in 10 respondents to the survey (58%) somewhat or strongly agree that their employer should provide a viewpoint on how much employees should contribute to their DC plans. Forty-four percent say employers should notify them if they are not saving enough, and 19% say employers should decide their savings rate on their behalf.
Asked to select the best way for an employer to motivate them to contribute more to their retirement plan and reach their retirement goals, 36% chose knowing the amount they should be contributing now from each paycheck—and how much more they need to save.
The survey finds that the employer match has a strong influence on participant deferral rates. Thirty percent view the percentage of salary matched as a contribution recommendation, and 19% interpret the percentage as what their employer “thinks they should be saving.” One-fifth (21%) set their 2017 deferral rate to what the employer will match.
Many plan features, some of which plan sponsors fear making, are supported by employees to help them achieve their retirement savings goals. For example, J.P. Morgan found 40% of participants agree that stretching the match from 100% of up to 6% of deferrals to 50% of up to 12% of deferrals would be most effective in helping encourage employees to save more.
According to previous J.P. Morgan research, one-quarter of plan sponsors are not implementing automatic enrollment due to fear of participant pushback; however, the new survey shows 82% of participants are in favor of or neutral toward automatic enrollment at a 6% default deferral rate. Likewise, the previous survey found 20% of plan sponsors are not implementing automatic deferral escalation due to fear of participant backlash, but 80% of respondents to the current survey are in favor of or neutral toward a 2% increase in deferrals each year until a 10% savings rate is reached.
J.P. Morgan found 62% of participants with both automatic features expect to be able to retire when they want versus 46% of those who were only automatically enrolled, and 80% of participants with both automatic features expect their savings to last throughout their lifetime versus 47% of those who were only automatically enrolled.
Guidance on investing
According to the survey findings, 60% of participants are “do-it-for-me” investors who prefer to leave investment decisions to investment professionals, while 40% want to take a more hands-on approach to investment decisions.
Yet, even these “do-it-yourself” investors lack some confidence in certain investment decisions. Only 37% of hands-on investors say they are very or extremely confident in which DC plan investment options they should choose, and only 44% say the same about how to adjust the way their plan assets are invested the closer they get to retirement. This compares to 32% and 35% of “do-it-for-me” investors, respectively.
Sixty-one percent of all participants surveyed agreed with the statement, “If I could push an ‘easy’ button for retirement and completely hand over my retirement planning and investing to a financial professional, I would.” Thirty-seven percent indicate that their employer has an obligation to help them pick the right investments in their DC plan, while 20% say their employer should decide their investment choices on their behalf.
The survey finds target-date funds (TDFs) are highly valued by participants: 88% find them appealing and, among those who say their employer offers TDFs, 71% are invested in them. Among “do-it-for-me” investors, 93% find them appealing and, when they are available in the plan, 81% invest in them.
However, even among “do it yourself” investors, 81% find TDFs appealing and, if they are offered in the plan, 54% invest in them.
In addition, fear of employee pushback was the most frequently cited reason for not conducting a re-enrollment among the 87% of plan sponsors who have not yet done so, yet 86% of participants (90% of “do-it-for-me” investors and 79% of “do-it-yourselfers”) are in favor of or at least neutral toward these strategies. Eighty-three percent of participants who went through a re-enrollment with a TDF as the qualified default investment alternative (QDIA) allowed their assets to be moved, and 99% of those who allowed their assets to be moved are satisfied.
More findings from the J.P. Morgan 2018 Defined Contribution Plan Participant Survey may be found here.