The COVID-19 pandemic has increased demand among retirees for retirement income solutions, according to BlackRock’s annual “DC Pulse” survey, which also found that nearly half of defined contribution (DC) plan participants’ finances were negatively impacted by the pandemic.
“Workers saving for retirement today are concerned that they are going to outlive their savings, or that they may not enjoy the same kind of comfortable retirement previous generations did,” the report stated. “Plan participants, plan sponsors, and retirees alike all emerge from the pandemic with a sharpened focus on retirement security and the importance of retirement income.”
The survey is a research study of 225 large DC plan sponsors, as well as more than 1,000 plan participants and 300 retired participants in the US. It was conducted by independent research company Escalent Inc. All plan participants polled were employed full-time and had access to a workplace retirement plan at the time of the survey.
According to the survey, 77% of participants are looking for financial help not just on reaching retirement, but on getting through it, and 81% said it would be helpful if their employer provided secure income-generating options as part of their workplace retirement plan. The survey also found that, because of the pandemic, 37% of participants are more interested in owning a product designed specifically to generate income in retirement.
Some 56% of participants say they would save more for retirement if they had an emergency savings fund set aside, while almost half say that feeling confident about their short-term finances makes them feel more confident about their long-term finances.
Among retirees, 67% said they are confident they have enough money to last through their retirement because they have a pension or other source of income, which was the most common reason, while 76% said that having secure income during retirement makes a bigger difference than they thought it would. And 71% of retirees said they would have chosen a steady income stream through retirement if given the choice.
Plan sponsors are also interested in helping their participants secure retirement income, with 86% saying their participants would benefit from a target-date fund (TDF) with a feature that generates guaranteed retirement income. Likewise, interest in income products is on the rise as 82% of sponsors that do not currently offer a specific retirement income product said they are likely to add one during the next 12 months.
The survey also found that 47% of participants say the pandemic has had a negative effect on how on track they are with saving for retirement. Participants who did not feel like they were on track were disproportionately impacted by the pandemic, as 54% said COVID-19 set them back with saving for retirement compared with 36% of participants who said they were on track.
Meanwhile, 61% of plan sponsors say at least half of their employees’ retirement readiness was negatively affected by the pandemic, which the report said may be larger than what participants report because plan sponsors have a broader, data-driven view that provides a look into more of the negative effects of the pandemic. And more than half of plan sponsors who keep track of short-term 401(k) loan withdrawals said employees dipped into their retirement plans for emergency spending needs last year.