One year into the COVID-19 pandemic, business leaders remain focused on helping employees manage the impact of recent market volatility on their retirement plans, according to the latest quarterly Principal® Retirement Security Survey 1. More than 75% of employers say they are doing their part by providing the education and resources needed to plan for retirement, yet half of employers also say they are concerned about the overall low preparation for retirement on the part of their workers. Nearly half of workers surveyed say they are somewhat or very confident about having enough money saved to live comfortably through retirement.
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"The latest findings showcase employers' continued dedication to supporting their employees' retirement readiness, as well as their overall financial wellness. This is all while managing the challenges of running their businesses during a global pandemic and a market environment they remain cautious about," said Sri Reddy, senior vice president, Retirement and Income Solutions at Principal Financial Group®.
As a leading retirement solutions provider, Principal ® works with a diverse group of collaborators to help workers and retirees with varying financial needs. Given the important role played in helping workers save for retirement, Principal added employers to this quarter's Retirement Security Survey. In addition to insights from workers and retirees, the survey includes small and medium-sized business leaders' concerns and actions surrounding retirement, financial behaviors related to market volatility, and COVID-19.
Among the report's key findings:
Economic outlook remains cautious. The majority of U.S. employers surveyed have remained committed to providing benefits and financial resources throughout the pandemic to help employees manage savings and income in retirement. 2 COVID implications are top of mind for employers, with many reporting concerns about its long-term financial impact. More than half of employers express caution regarding the economic outlook for the next year (53%). This is a shift from July 2020, when 40% of employers expressed caution.
Employers are concerned about how their employees will fair once in retirement as well as talent retention and attraction.They share top reasons they continue to offer retirement plans, despite challenges posed by COVID:
- To encourage employees to save for retirement (74%).
- To help provide financial security to employees in retirement (70%).
- To help retain current employees (60%).
- To help employees have enough income in retirement to live comfortably (60%).
Half of employers are concerned their employees are not planning enough to manage their savings and income in retirement. Just 16% of employers feel most of their employees are saving adequately for retirement.
- Almost 40% of workers are concerned about outliving retirement savings.
- Nearly half (49%) of workers say they either don't understand retirement income strategies or haven't decided on an approach. However, 70% of workers say they are interested in investment options within an employer sponsored retirement plan that includes a guaranteed lifetime income solution.
More than half of employers expressed desire to make retirement income options available to plan participants (nearly 60%).
- Roughly 40% want to actively encourage plan participants to elect retirement income solutions.
- More than 35% encourage retirement income solution utilization by as many plan participants as possible.
"Effective employee engagement can help workers prepare for retirement," said Reddy. "In addition to financial wellness education, we actively encourage the adoption of auto features including plan reenrollment as well as retirement income solutions. Connecting workers with the right resources and plan features can help them recognize their options and feel more secure about their path forward."
When it comes to employees boosting their retirement readiness, employers highlight several opportunities for improvement:
- Review expected health care costs in retirement (nearly 70%).
- Create a retirement income plan (nearly 70%).
- Determine how to manage multiple retirement accounts (65%).
- Identify if they will have enough income in retirement from guaranteed sources (i.e. Social Security, pensions, annuities) (57%).
Employers see retirement readiness as an important part of overall financial wellness.Employers report if they could encourage their employees to take action in 2021 to improve their financial health, they would focus on increasing employee savings rates or deferral percentages within the retirement plan (37%) and help employees start saving in the plan offered, if eligible (31%).
To access the full report, please click here.
About the Principal Retirement Security Survey
During January and February, Principal® surveyed 160 plan sponsors representing more than 11 industries across the U.S. The survey explored their sentiments related to employees' retirement readiness, factors considered when making benefit decisions, and financial wellness impacts related to the COVID-19 pandemic. The first-quarter 2021 edition of the Principal® Retirement Security Survey is the fourth conducted during the COVID pandemic and includes plan sponsor feedback for the first time.
Principal helps people and companies around the world build, protect, and advance their financial well-being through retirement, insurance, and asset management solutions that fit their lives. Our employees are passionate about helping clients of all income and portfolio sizes achieve their goals—offering innovative ideas, investment expertise, and real-life solutions to make financial progress possible. To find out more, visit us at principal.com.
For retirement planning resources, including client guides, educational articles, and checklists, visit principal.com/prepare.
The subject matter in this communication is educational only and provided with the understanding that Principal ® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other professionals on all matters pertaining to legal, tax, investment or accounting obligations and requirements. The information shown is not intended to provide any suggestion that you engage in or refrain from taking a particular course of action.
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Insurance products issued by Principal National Life Insurance Co (except in NY) and Principal Life Insurance Co. Plan administrative services offered by Principal Life. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities, Inc., 800-247-1737, member SIPC and/or independent broker/-dealers. Referenced companies are members of the Principal Financial Group ®, Des Moines, IA 50392.
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1 Principal® Retirement Security Survey, Q1 2021. 2 Principal® Financial Well Being Index: Business Owners. July 2020.
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