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Helping Employees Achieve Secure—and Timely—Retirements

Finance executives continue to look for ways that their companies can help employees better manage their own retirement planning. This conclusion is evident from the results of this year’s survey of finance executives on retirement and benefits planning, conducted by CFO Research in collaboration with Prudential Financial, Inc.

The survey shows that finance executives anticipate having to manage an increasingly aging workforce. Longer life spans mean that employees will need to make their retirement savings stretch even farther. More than half of the finance executives surveyed (57%) believe their companies’ employees already will be delaying retirement due to inadequate savings.

The survey shows that finance executives anticipate having to manage an increasingly aging workforce.

One executive echoed this sentiment when writing that her company needed to address gaps in its portfolio of defined contribution (DC) plan investments “that affect long-time employees reaching retirement age.” In fact, nearly half of the survey respondents (49%) say that the concern over market volatility drives the need for offering more conservative investments in DC plans.

Overall, survey results reveal a growing interest in DC plan features that help individual employees save an appropriate amount while ensuring those savings last during retirement. These include adopting matching contribution formulas that encourage employees to save at higher rates, utilizing automatic contribution escalation policies, and making guaranteed lifetime income products available.

More than half of the respondents (53%) believe DC plan participants will make better behavioral decisions (e.g., not getting out of investments at the wrong time) if they are invested in an option that includes the presence of a guaranteed income feature. Virtually the same number (53%) say that participants are apt to make better investment decisions when presented with pre-packaged diversified investments like target-date funds. (See Figure 1.)

Finance executives’ interest in guaranteed lifetime products, in particular, shows an uptick from last year’s survey. Both last year and this year, exactly half of the respondents said their companies were likely to offer guaranteed lifetime income products in their DC plans (although only between 5% and 6% of respondents say that they already do). However, interest this year is somewhat stronger—the percentage of those saying they were “very likely” to incorporate these products, instead of merely “somewhat likely,” has grown over the years, jumping from 9% in the last survey to 17% in 2016. (See Figure 2.)

 

Research Sponsor's Statement

“Although the CFOs surveyed work for companies with DB plan assets, well over half of those companies have closed their plans to new participants or state that they are likely to do so within the next two years. As such, their survey responses indicate an interest in improving the likelihood that their 401(k) plans will be successful in providing retirement security for the employees who won’t have the benefit of a DB plan. Improving contribution rates through more efficient matching contribution formulas, allowing for automatic contribution escalation, and providing guaranteed lifetime income options are each ways to help accomplish this.”

Jamie McInnes
Senior Vice President, Prudential Retirement

About the Survey 

This year marks the sixth annual survey that CFO Research has conducted with Prudential Financial, Inc. The surveys provide insights into finance executives’ current thinking on their companies’ retirement and benefits programs. This year’s results are based on survey responses of 180 finance executives, most of whom (78%) work at large U.S. companies with more than $1 billion in annual revenues. All of the companies in the survey also have defined benefit (DB) plans with more than $250 million in assets; 31% have between $1 billion and $5 billion in assets, and an additional 31% have more than $5 billion in assets. Approximately half of the companies have defined contribution (DC) plan assets over $500 million.

 

 

 

 

 

 

 

 

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