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Defined Contribution

BlackRock: DC participants most concerned about monthly income in retirement

Transforming retirement savings into ongoing income in retirement is a top concern for defined contribution participants, said a BlackRock (BLK) survey released Tuesday.

The annual survey of more than 200 executives of large defined contribution plans and 1,000 U.S. plan participants found that 51% of the participants surveyed agreed that "it's difficult to know how my retirement savings will translate into monthly income at retirement," and 40% said "the thought of having to generate my own income in retirement worries me."

Ninety-three percent of participants surveyed also agreed that their plan account should have an estimate of the annual dollar amount or percentage they can safely withdraw in retirement along with what their monthly retirement income is expected to be.

"From here on, changing market conditions and the erosion of guaranteed retirement benefits will almost certainly demand that individuals get much more comfortable with spending down their accumulated assets to generate a secure income stream," said Anne Ackerley, managing director and head of BlackRock's U.S. and Canada defined contribution group, in a news release about the survey. "Our survey makes clear that plan participants want their employers to help them manage the saving-to-spending transition — and sponsors agree they need to deliver this help."

Eighty-three percent of plan executives surveyed said they have taken some sort of action to encourage participants to keep their assets in the plan after retirement, with 35% saying they have added retirement income investment options to their plans, 33% saying they have provided guidelines on withdrawal rates and/or improved distribution options and 29% saying they improved communications to participants about staying in the plan after retirement and/or provided guidelines on how to budget in retirement, BlackRock found.

Among the types of investment options plan executives are encouraging participants to consider to support their spending needs in retirement, target-date funds were the most common at 45%; followed by managed accounts, 40%; annuities, 33%; bond funds, 30%, multiasset income funds, 30%; and managed payout funds, 26%. However, the survey also suggested "that more focus may be needed on the sponsor side in retooling the target-date fund" as a drawdown option, BlackRock said in the news release. Ninety-three percent of the plan executives surveyed said their plans do not currently offer investment options specifically designed to help participants with their retirement spending needs

Other findings from the report include:

  • Despite their concern about translating retirement savings into ongoing retirement income, 90% of participants surveyed by BlackRock said they were at least somewhat confident with their overall financial situation and 61% said they felt they were on track to retire with the lifestyle they wanted, due in large part to investment performance. In 2017 and 2016, 56% and 52%, respectively, of participants said they felt they were on track to retire with the lifestyle they wanted.
  • At the same time, however, more plan executives (54%) now agree that the majority of their participants will have to delay retirement, up from 34% of plan executives in 2017.
  • Among the changes plan executives have taken over the past two years to improve participants' retirement outcomes, raising the default contribution rate was the most common at 20%; followed by selecting a new qualified default investment alternative, 18%; and changing the company match, 17%.