Survey: One-Third of Americans Are Not Familiar with Retirement Plan Options

New York — Feb. 26

One-third of Americans who participate in an employer-sponsored retirement plan say they are not familiar with the investment options in their plan, according to a survey released by TIAA-CREF.

The research also shows a pronounced difference between male and female respondents, with 37 percent of women stating they are not familiar compared to 29 percent of men.

Generational differences also are apparent, with 43 percent of Gen Y respondents stating they are not familiar with their plan options, according to the survey, conducted by an independent research firm that polled a random sample of more than 1,000 adults nationwide on their retirement plans.

Most experts recommend saving at least 10 to 15 percent of annual income for retirement, and people who are familiar with their investment options are almost twice as likely to follow this guidance: 39 percent of people who are familiar with their options save more than 10 percent of their annual income for retirement, compared to 21 percent of people who are not familiar with their options, the survey said.

Twenty-eight percent of survey respondents stated they do not understand all of their choices for how to invest their money in their retirement plan. More than one-third (36 percent) feel they have either too many or too few investment choices.

The number of investment choices in a retirement plan makes a critical difference in employees’ confidence regarding the adequacy of their retirement savings. Those who feel they have the wrong amount of investment choices are far more likely to be concerned about running out of money in retirement. Nearly two-thirds (65 percent) of those who think they have too many investment choices are very or somewhat concerned about running out of money in retirement, as are 55 percent of those who don’t think they have enough choices.

By contrast, 40 percent of respondents who feel they have the right number of investment choices are “not at all concerned” about running out of money in retirement, according to the survey.

Plan sponsors can be the reliable resource employees seek to help them navigate their investment options. The survey also revealed that 81 percent of respondents trust financial information offered by their employer, a greater percentage than those who trusted financial information offered by a traditional financial institution, such as a bank or retirement plan provider (69 percent), or their family (63 percent).

In addition to communications, advice and education, plan sponsors can provide investment options that address employees’ concerns. Lifecycle funds, for example, are a common investment option that provides a simple solution for individuals who feel overwhelmed by choices, while offering a broad, diversified set of investments to those who want to ensure they are getting the most from their plans.

These age-appropriate, professionally managed mutual funds shift their asset allocations within the fund automatically over time to become more conservative as retirement nears, yet provide the equity exposure necessary to portfolios as people live longer.