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 by TIAA-CREF.
The research also shows a pronounced difference between male and female respondents, with 37% of women stating they aren’t familiar compared to 29% of men. Generational differences also are apparent, with 43% of generation Y respondents stating they’re not familiar with their plan options.
Thirty-nine percent of people who are familiar with their options save more than 10% of their annual income for retirement, compared to 21% of people who aren’t familiar with their options.
“This research shows that plan sponsors—supported by their plan providers—must continue to engage and educate employees about these options and how they work, so that employees are not leaving their financial well-being to wishful thinking and guesswork,” explains Teresa Hassara, executive vice president of TIAA-CREF’s institutional business.
Twenty-eight percent of survey respondents stated they don’t understand all of their choices for how to invest their money in their retirement plan. And 36% 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.
Sixty-five 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% of those who don’t think they have enough choices. By contrast, 40% of respondents who feel they have the right number of investment choices are “not at all concerned” about running out of money in retirement.
Plan sponsors can be the reliable resource employees seek to help them navigate their investment options. The survey also revealed that 81% 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%), or their family (63%).
“Plan sponsors can play a really powerful role in helping employees understand their retirement plans because employees trust them,” she says. “Sponsors can encourage employees to take action through targeted communication, education, and advice that resonates with employees based on where they are in their lives.”
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