New Retirement Research Shows Positive Retirement Savings Behavior Does Not Equal a Confident Outlook for the Future
New MassMutual research reveals myths about retirement confidence; Working with a financial professional may help alleviate anxiety
(Springfield, MA) - New, thought-provoking research released today by MassMutual Financial Group reveals a surprising contrast in consumers’ confidence about retirement preparedness and their actual savings behavior that could help shape the next generation of retirement savings solutions. The research study, conducted by Massachusetts Mutual Life Insurance Company (MassMutual), included responses from more than 17,000 individuals participating in some 2,300 employer-sponsored retirement savings plans administered by MassMutual’s Retirement Services Division.
In examining the relationship between savings confidence and actual savings behavior, the study found that individuals who save more and are more active in managing their retirement savings actually are less confident in their retirement security and the retirement decisions they make compared to individuals with lower savings rates. A key finding showed that those who are more active in managing their retirement savings (79 percent) are also more eager for help and information about investments and investing versus those who are less active (47 percent). According to retirement experts at MassMutual, working with a financial professional may provide the kind of help these individuals are eager for, as well as help alleviate anxiety they may have around their investments for retirement.
“Rather than just track what people are actually doing in terms of retirement savings, we are also deeply interested in the ’Why,’” says Ian Sheridan, corporate vice president and chief marketing officer for MassMutual’s Retirement Services Division. “Our research shows that what individuals say and what they actually do are at times explicitly different. This study will help us better understand the savings-mindset of individuals to better provide them the information, resources and products they need to feel confident about their retirement future.”
Participants in the MassMutual study were categorized as low, medium and high savers based on their annual deferral rates of salary into a 401(k) savings plan. Low savers deferred less than 4.0%, medium-savers between 4.0% and 7.99% and high savers deferred 8.0% or more of their salaries.
Individuals with the highest deferral rates said they enjoy managing their finances more than the low and medium savers (57 percent of high savers versus 49 percent of medium and low savers). Despite this fact, those who take an active role in saving more and making investment decisions lack confidence about those investment decisions and their financial security as they approach retirement. This is evidenced by the following findings:
* More money saved does not equal more confidence. Only 44 percent of high savers expressed confidence when making their investment decisions, compared to 54 percent of low and medium savers.
* Insecurity about investment decisions abound. Sixty-five (65) percent of high savers say they aren’t sure their investment decisions are the right ones for them, as do 60 percent of low and medium savers.
* Saving more doesn’t mean saving enough. High savers are more concerned that they won’t have enough saved for retirement (44 percent) compared to only 32 percent of low and medium savers.
* Active savers want more help. High savers are eager for information about investments and investing, with 79 percent indicating they want help versus only 47% of low and medium savers.
“The lesson is that some of the traditional assumptions about investment confidence, like deferral rates and active investment decisions, may indicate the exact opposite,” Sheridan continued. “We cannot assume that someone who saves aggressively and actively manages those savings is confident or secure in their financial situation. Working with a financial professional can help these high-savers better understand their position and make them more comfortable and confident in their retirement prospects. Likewise, we have to continue to find ways to encourage those low and medium savers that it is never too late to start saving more.”
For the retirement professionals at MassMutual, understanding this disconnect between consumer attitudes and actual savings behavior is driving the next generation of retirement savings products and services. For example, when enrolling individuals in 401(k) plans, MassMutual uses its e4SM system to create a dynamic enrollment environment. Using a handheld device, individuals can make enrollment, deferral choices and asset allocation decisions immediately, which results in higher participation and higher savings rates. This dynamic approach works well across all employee groups, from those very active and knowledgeable about heir retirement savings to those uninterested and unengaged.
As part of the company’s long-held belief that consumers require varying degrees of financial assistance at different points in their lives, MassMutual has embarked on a multi-faceted consumer education campaign designed to help consumers move beyond just thinking about their financial issues and actually taking action - by having a plan to help them realize their financial goals. Part of this campaign includes the recently announced national sponsorship of the PBS documentary Retirement Revolution, being produced by WTTW National Productions in Chicago and scheduled to air nationally this spring.
“Anything that we can do to better engage Americans in helping to build their retirement future is a positive step,” says Sheridan. “Our goal is to give people the knowledge they need at every step of the process to move forward with confidence.”
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