BlackRock: Workers Want More Resilient 401(k) Plans, Expert Advice from Employers

• Workplace savers who feel off-track to retire have more than doubled since 2021, reaching a survey record.
• As volatility increases, 90% of workers demand retirement income
• Most Gen Z respondents (71%) want help managing their 401(k), and seek advice from employers more than any other generation
• Baby Boomers are most likely to delay retirement (36%)

Only about half of Americans (56%) report they feel “on track” for retirement, according to the eighth annual BlackRock Read on Retirement™ report. The results show an 11% drop in confidence compared to 2022, with the top key stressors cited as market volatility (93%), inflation (86%) and worries about outliving savings (71%).

Additionally, while workers are still contributing to retirement plans at similar rates from 2022, nearly 30% are planning to delay retirement, driven mostly by market volatility concerns, and 62% report that inflation and volatility-related hardships have set them back with saving for retirement – compared with 42% from 2022.

Anne Ackerley, Head of Retirement at BlackRock, said: “While the drop in confidence we’re seeing hasn’t translated to a decrease in saving rate yet, this moment matters. There’s an opportunity to shore up retirement confidence and help workers navigate an uncertain environment ahead. American workers – particularly, Gen Z, are asking for help to plan for their future. It’s our responsibility as an industry to provide them the solutions and tools they need to build more resilient retirement plans.”

Key Findings:

Retirement income could provide greater certainty, peace of mind

According to the findings, the top three things workplace savers want to know are: what their nest egg will be, how much they can spend each year in retirement, and how long their savings will last. Currently, only 21% of workers are very confident they will have enough money to last through retirement. Yet, 71% said they would save more now if their plan had an option to provide guaranteed income in retirement – and nearly 90% of workplace savers say having access to guaranteed income would positively impact their well-being.

Additionally, 98% of employers feel responsible for helping their savers generate income, but most don’t feel highly confident that their plan can. In fact, while 61% of employers in 2020 were highly confident that their plan enabled savers to know how much of their balance can be spent each year in retirement, today only 37% of employers are.

Adapting to a new market regime

From plan design to investments, employers have many levers to pull to help savers navigate this environment. This year’s report points to a growing interest in active management as a key part of the solution. 41% of workplace savers surveyed weren’t initially familiar with active investing strategies, but 79% would be interested in using an actively managed fund after learning more. Plan sponsors are equally bullish. Most (72%) believe that active managers can consistently outperform the market.

Leveraging the power of automation

Convenience and access to professional management are driving interest in aged-based strategies like target date funds, which are now the most common default investment option for 401(k) plans. However, while they still only account for about a third of 401(k) plan assets, this year’s survey finds that saver demand for target date funds is high. 71% of savers say that it would be helpful for their employer to automatically reallocate their assets to more appropriate investments for someone their age, up from 65% in 2019. Additionally, 82% of workplace savers not aware of target dates would be interested in using one within their retirement plan. Of those already invested, the most common reason cited was access to professional management (35%).

A need for guidance and education

Greater uncertainty is resulting in savers turning to trusted sources and advisors to help manage their retirement investments. Gen Z is most likely to rely on an employer for help with how much to save and in what way. 71% said they don’t understand enough about the investments in their plan to be confident in managing it themselves, compared to roughly half in other generations. They are also the most likely cohort to seek out a financial advisor through their employer.

Advisors are the most trusted source of advice on retirement spending, and 45% of workplace savers use a financial advisor for retirement planning, the report shows, with almost 30% of those that feel on track for retirement saying that access to an advisor is a reason why. Close to half report finding these advisors through their employer.

About The BlackRock Read on Retirement

The BlackRock Read on Retirement™ report provides insights from a research study of over 450 large defined contribution plan sponsors, 1,300 workplace retirement plan savers, 1,300 independent savers and 300 retired workplace savers in the United States. The survey is executed by Escalent, an independent research company. Plan sponsors were interviewed using an online survey conducted between March 21 and April 6, 2023, while all other respondents were reached between April 24 and May 24, 2023.

About BlackRock

BlackRock’s purpose is to help more and more people experience financial well-being. As a fiduciary to investors and a leading provider of financial technology, we help millions of people build savings that serve them throughout their lives by making investing easier and more affordable. For additional information on BlackRock, please visit www.blackrock.com/corporate | Twitter: @blackrock | LinkedIn: www.linkedin.com/company/blackrock

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