In-plan advice leads to positive retirement outlooks

While only 18 percent of employees participate in advisory services through their 401(k) plans, they report having a more positive outlook about their retirement plans as opposed to those who do not, according to the Mercer Workplace Survey.

“This is great news for plan sponsors who offer advisory services in their 401(k) plan as there is a clear correlation between positive retirement sentiment and engagement with these services,” says Dave Tolve, administration product leader for Mercer. “Yet with relatively low usage among participants – especially when you start to look at the demographics – there is still work to be done.”

Among respondents who participate in advisory services, they expect to have enough money to pay for health care at 49 percent, 40 percent plan to live as well or better during retirement, and 26 percent of respondents can help younger family members with tuition or housing expenses. Meanwhile, for respondents who do not participate in advisory services, 35 percent, 29 percent plan to live as well or better during retirement, and 15 percent can help younger family members with tuition or housing expenses.

Other positive impacts include being able to leave money for charity at 33 percent over 23 percent and having plans to travel extensively at 24 percent over 16 percent, respondents say. Seventeen percent of respondents participating in advisory services anticipate running out of money as opposed to 21 percent of those who do not participate, and 34 percent of respondents receiving advisement plan to reduce their standard of living over 44 percent of those without advisement.

Based on the survey’s demographics of average in-plan users who seek advice, they are younger; better educated; and have higher incomes, balances and deferral rates.  

“This profile of the typical in-plan advice user should give pause to plan sponsors who want to communicate the high value that investment advice services can provide,” says Suzanne Nolan, administration marketing and communications leader for Mercer. “These are participants who may in fact need this advice the least, given that they often have longer retirement savings horizons, tend to utilize outside advisors and potentially have both more financial and educational resources at their disposal. The true challenge for a plan sponsor offering in-plan advice is to reach those on the lower end of the income spectrum, where ‘every dollar counts’ and who may also have a shorter timeframe in which to accomplish their retirement savings goals.”

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