Employers Are Expected to Play An Active Role in Providing Guidance
March 2004 (Newstream) --
According to a new study by Prudential Financial, Inc. (NYSE:PRU), the majority of American workers who participate in employer-sponsored retirement programs such as 401(k)s would like advice on how to manage their plan assets, and feel their employer should provide information and guidance in support of their program's investments.
"Professional advice is key in helping to plan and save for a secure retirement," said Scott Sleyster, president of Prudential Retirement. "Also, guidance is most valuable when it addresses an individual's unique issues. Since participants have little or no access to professional guidance now, even the most basic form of personalized education could make a huge impact on how they manage their retirement savings."
Notable findings from Prudential Financial's second annual study of participants in employer-sponsored retirement programs conducted in July and August 2003 include:
- Professional advice is needed more than ever
- Concerns about the economy, stock market volatility and, to many, the recent painful experience of losing retirement assets, have intensified workers' quest for professional advice. Three in four agree that professional investment advice is more important than ever.
Employers are expected to play a significant role in providing guidance
- Three in five agree "my employer must provide information and guidance to help me keep my retirement savings on track." Female participants, those aged 21-34, those not college-educated, and those with under $50,000 household income are even more likely to expect employers to provide such assistance.
- There is an eager audience for advice on a wide range of subjects
Prudential's survey listed seven topics and, for each, asked workers if they think they "definitely need," "it would be nice to have," or they "don't really need" advice on that subject.
How to grow their retirement assets at an acceptable level of risk weighs heavily on participants' minds with 78 percent and 77 percent, respectively, finding advice on "maximizing returns" and "minimizing chances of losing retirement money" to be useful. Other advice considered "definitely needed" or "nice to have" include:
- How to make adjustments to retirement portfolio to meet long-term goals - 74 percent;
- How to allocate money among the options within retirement plan - 67 percent;
- What to do with retirement plan money when changing jobs - 58 percent;
- What to do with retirement plan money when retiring - 55 percent;
- How much to contribute to retirement plan - 52 percent.
- Guidance and advice should address the different needs of employees at various life stages
84 percent of those between ages of 21 and 34 would like to get advice on how to maximize return, and 70 percent of this group need advice on managing their plan assets when changing jobs.
Among 35-49 year-olds, 80 percent are interested in advice about how to adjust their portfolio, and 61 percent would like to know more about what they should do with their money when they retire.
Those with under $50,000 household income are in greater need for all types of advice compared to those earning $75,000 or more.
If personalized, even the most basic forms of guidance and education can be very powerful
Participants would embrace guidance and act on it if it can be personalized by incorporating personal data such as age, salary, years until retirement, contribution rate, investment choices and risk tolerance. At least three in four plan participants would be "very" or "somewhat" likely to take actions based on such "planning messages" that can be offered at the workplace.
"American workers are making a tremendous effort to save for retirement through employer programs, but the way they manage their assets can be greatly improved," said Paul Chong, executive vice president, Business Development, Prudential Retirement. "There is a lot of information about retirement saving and investing available, but it rarely motivates participants to take action. In the absence of professional investment advice, the most effective solutions are education and advisory tools that use data on age, salary, and years until retirement to address individual circumstances and needs."
Prudential Financial's Annual Study of Retirement Plan Participants polled 1,000 Americans in July and August 2003 to explore issues critical to employer-sponsored defined contribution plans and retirement savings. The study's participants are a national representative random sample of full-time employed men and women aged 21 to 64 who currently participate in 401(k), 403(b), 457, or other types of plans offered by their employers. The margin of error is plus or minus three percentage points at the 95 percent confidence level.
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