Plan Sponsors, Participants Want Retirement Income Education

Retirement plan sponsors tend to overestimate their participants’ retirement readiness, but employers and their employees are all seeking education regarding how to generate income in retirement, according to Voya Investment Management research.

Voya also found a significant split between plan sponsors’ and plan participants’ perceptions of their levels of retirement readiness: 87% of plan sponsors say their workers feel somewhat or very prepared for retirement, but only 63% of participants agreed.

“It’s become clear there is a disconnect between employers and their employees surrounding retirement readiness,” said Brian Houston, Voya’s senior vice president and business development manager for DCIO, in a press release. “Specialists and employers can consider these findings an opportunity to bring forward more retirement readiness support solutions, such as offering an expanded investment menu for workers nearing retirement that includes additional fixed-income options, lower volatility equity options and other strategies.”

Plan sponsors cited guidance on selecting retirement income options (53%) as the top service or benefit they look to a retirement plan adviser to provide, while 73% of sponsors identified adding a retirement income feature or product as an important area of focus in the next two years, and 85% said an aging participant base has brought greater focus to the need for retirement income products.

Plan sponsors cited participants’ lack of understanding and support for retirement income solutions as a barrier to increasing their participants’ retirement readiness (46%), placing participant inertia and lack of engagement significantly lower at (28%).

In previous iterations of the survey, “plan sponsors ranked investment selection/monitoring as their most desired service from advisers, [but] this year, that service fell to second place, with guidance on retirement income investing options (a new choice in the survey) ranking as the most desired service,” Voya researchers stated.

In 2023, plan sponsors’ top concerns about their companies’ plans included:

• Ensuring the plan is consistent with new regulations or compliance requirements (57%);
• Ensuring that participants are appropriately invested (46%);
• Reducing plan fees and expenses (42%); and
• Helping participants transition to retirement or become retirement ready (42%).

Plan participants also reported being interested in retirement income features: 85% said education on retirement income is what they want most from a financial wellness program, and 87% reported being somewhat or very interested in a retirement income solution/investment option which helps provide income during retirement.

Despite participants’ interest in retirement income, workers lack confidence in making retirement income planning decisions, with 30% not at all confident in converting savings into income in retirement; another 29% are not at all confident they understand how much money they will need in order to retire comfortably; and 30% are not at all confident transitioning to retirement.   

Voya Investment Management’s online survey of retirement plan sponsors was conducted from mid-February through early March. Previous iterations of the survey were conducted in March 2021, December 2018 and April 2016. The survey was expanded in 2023 to include contributing participants for the first time.

The survey included feedback from 304 plan sponsors, 205 plan specialists and results of an online survey conducted among 500 benefits-eligible, employed Americans who are actively contributing to their employer-sponsored retirement plan.