New data from Prudential suggest its time to redefine retirement programs. Protect people from their worst enemy: themselves, offers one respondent.
(BLACK PR WIRE) (January 26, 2010) NEWARK, N.J.--(BUSINESS WIRE)-- In the wake of the most severe economic crisis since the Great Depression, the overwhelming majority of American workers believe it’s time to create a new and improved model for workplace-provided retirement programs, according to a new survey by Prudential Financial (NYSE: PRU).
Prudential's sixth Workplace Report on Retirement Planning revealed that 84 percent of Americans would eagerly embrace a fresh approach to the structure of their workplace retirement plans especially plans with autopilot features spurred in large part by the recent economic crisis but also by the ongoing struggles Americans face in making the right decisions about how best to manage their programs.
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.
Prudential Retirement delivers retirement plan solutions for public, private, and non-profit organizations. Services include state-of-the-art record keeping, administrative services, investment management, comprehensive employee investment education and communications, and trustee services. With more than 85 years of retirement experience, Prudential Retirement helps meet the needs of more than 3.7 million participants and annuitants. Prudential Retirement has $171.9 billion in retirement account values as of September 30, 2009.
Prudential Financial, Inc. (NYSE: PRU), a financial services leader with approximately $641 billion of assets under management as of September 30, 2009, has operations in the United States, Asia, Europe, and Latin America. Leveraging its heritage of life insurance and asset management expertise, Prudential is focused on helping individual and institutional customers grow and protect their wealth. In the US, the company’s Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. Prudential's businesses offer a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, investment management, and real estate services. For more information, please visit www.news.prudential.com
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