“Our survey found that the losses sustained by American workers during the past two years really drove home the inherent limitations of longstanding retirement-plan design,” said Christine Marcks, president of Prudential Retirement.
“We’ve known for a long time that Americans aren’t saving enough for retirement. And we’ve known that participation rates aren’t what they need to be to ensure retirement security for American workers. Now, with the effects of the economic crisis still front-and-center in people’s mind, we’re seeing increased awareness of the importance of workplace-provided plans, and we’re witnessing increased concern and uncertainty from workers about their ability to make sound, appropriate, and informed decisions,” she added.
“The net result is a resounding call to re-evaluate defined contribution plans, to enhance current plan design, and to redefine retirement in ways that help build long-term financial security for American workers,” added Marcks.
The answer, said survey participants, lies in fully automating defined contribution programs, restructuring current plan design to incorporate “autopilot” plan features such as automatic enrollment, automatic savings default rates, auto contribution escalation, auto asset allocation, and—perhaps most importantly -automatic conversion of plan assets into a guaranteed retirement-income stream.
“Today’s workers recognize the critical role played by their employment-based retirement plan and are keenly aware that the existing ‘do-it-yourself’ approach simply isn’t the best way to build or achieve retirement security,” said Marcks. “Importantly, workers seem comfortable giving up a level of ‘control’ if it might mean the potential for better outcomes over the long-term.”
In fact, the survey found that support for “auto-pilot” retirement programs overwhelmingly positive and equally shared by younger and older workers.
- Enrollment and Savings Rates. Some 74 percent had a “positive” impression of automatic enrollment, while automatic contribution rates and periodic contribution increases garnered “positives” from 70 percent and 65 percent of survey participants respectively.
- Investment Selection. Automatic asset-allocation was viewed as a “positive” plan feature by 59 percent of younger workers (ages 21 to 44) and by 57 percent of older workers (ages 45-64).
- Guaranteed Income. Automatic conversion of assets to guaranteed retirement-income was seen as a “positive” feature by 71 percent of younger workers and by 64 percent of older workers.
- Full Autopilot. Approximately 61 percent of younger workers and 59 percent of older workers expressed a preference for a fully automated plan structure when given a choice between the auto-pilot approach and the common “do-it-yourself” model.
Equally revealing, 85 percent of respondents said a fully automated plan represents a “new and different” approach to current defined contribution plan design, and more than half felt they would have come through the recent economic crisis in much better shape if their plan were “on autopilot.”
“Our Workplace Report on Retirement Planning revealed an American public worried about their retirement security and unsure of how to manage their workplace retirement programs. More than half of respondents feel they are ‘behind schedule’ in meeting their retirement-savings goals, and two-thirds believe they may have to work longer and retire later than they once expected,” said Marcks.
“To change the playing field, especially in light of the lessons learned from the recent economic downturn, they’d welcome fresh, bold and innovative approaches, and they wholeheartedly agree that auto-pilot design - which effectively replaces individual oversight with professional management - represents the best and brightest hope for better, more-secure retirement outcomes,” she added.
