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Annual BlackRock 401(k) Survey: Plan Participants Make Retirement Savings a Priority, But Many Remain Confused, Uncertain on Re

^{Published on 2010-06-29 10:05:33 - Market Wire}
 

NEW YORK--([ BUSINESS WIRE ])--BlackRock, Inc. (NYSE: BLK) today announced that more than half of 401(k) retirement savings plan participants report that their plan has become more important to them since the financial crisis of 2008, up nearly 10 percentage points from last year. This is according to the results of a nationwide survey released by BlackRock, the world's largest asset manager.

"If the company match and auto-escalation can prompt better savings rates, we should be doing all we can with these features to help participants achieve better savings behavior"

BlackRocka™s second annual Survey of 401(k) Participant Attitudes and Behaviors also indicates that employers have a significant opportunity now to improve the effectiveness of their defined contribution (DC) plan by focusing on key plan features that are instrumental in strengthening retirement preparedness.

aWe heard two clear messages from participants: First, saving for retirement is a top priority for them and, second, they are confused about how to turn retirement savings into retirement income,a said Chip Castille, head of US and Canada defined contribution at BlackRock.

Although seven of 10 plan participants ranked retirement savings as a priority well ahead of other key savings goals, participantsa™ savings rates are not sufficient to meet their retirement needs.

aWhen it comes to planning for retirement, the truth is wea™re asking employees to perform complicated actuarial accounting related to longevity and inflation risk,a Castille said. aIf participants are being asked to shoulder the risks of managing their retirement, then we are obligated to minimize those risks by understanding their concerns and challenges and then responding with more effective plan design, product innovation and effective communication.a

The BlackRock survey was fielded to 1,000 401(k) participants via the Internet by Boston Research Group in March 2010. The survey focused on examining participant views and behaviors about retirement planning and saving, retirement confidence levels, and the aspend downa phase of retirement, with key implications for potential plan improvements.

Retirement An Overriding Savings Goal;

Employers Equipped to Prompt Better Savings Behavior

For many plan participants, saving for retirement outstrips all their other savings goals, including healthcare (61%) and agetting out of debta (51%), according to the BlackRock survey. While the majority of participants (74%) reported retirement savings as a top priority, they are uncertain about setting a proper savings rate. Findings include:

• Of the 77% of participants who reported that they knew the rate at which their employer would match their savings, more than four of five (83%) said they were investing at the rate to receive the full match.
• The employera™s matching contribution was ranked by employees as the most powerful influence on their saving (ranked as avery influentiala by 45% of plan participants).
• One-third of participants ranked the DC plan feature to automatically increase savings rate as the next most powerful savings incentive.

aIf the company match and auto-escalation can prompt better savings rates, we should be doing all we can with these features to help participants achieve better savings behavior,a Castille said. aWe know from behavioral finance research that employees wona™t do it on their own. Employers have the tools right at hand to improve savings rates.a

Castille says BlackRock is now exploring new approaches to leverage the power of the company match to influence improved savings rates without putting more pressure on the company balance sheet.

Employees Need Support, Guidance for Retirement Income;

Prefer Steady Stream of Income Over Lump Sum Payout

The BlackRock survey indicates employees are not knowledgeable about retirement realities that shape a retirement spending strategy. For example, employee views about how long they plan to be in retirement and at what rate they can deplete their savings dona™t align. The adisconnectiona illustrates the challenges employees face in understanding how to secure a self-funded retirement. Findings include:

• More than six of 10 (62%) plan participants believe they will live in retirement more years than they believe their retirement nest-egg will need to last.
• Over half (57%) of plan participants said they would prefer to receive a steady stream of income in retirement vs. a lump sum payment (9%).
• The great majority of participants (82%) said they had little or no experience in managing a sum of money over $100,000.

aWhen the vast majority of participants say they are not prepared to manage $100,000 or more, then how can we ask them to manage longevity risk or secure a stream of income on their own?a Castille said. aParticipants are telling us they want income solutions in their 401(k) plan, and therea™s no question that providers and employers must create solutions that help employees achieve their objectives.a

The BlackRock survey findings also suggest that additional guidance from plan sponsors would be welcomed by most 401(k) plan participants. For example, almost three fourths of participants (72%) said they would accept their employera™s guidance to shift their balances to a well diversified managed account.

Coming:A New Generation of Defined Contribution Plans

The DC plan was born 30 years ago as a supplemental savings plan and has worked hard to keep up with the demands of a changing retirement landscape. aMore and more, workers are looking to the DC plan as their primary method of financing their retirement,a Castille said.

aThe next decade will be a turning point for the DC plan. Employers can start now by increasing savings rates,a Castille said, also noting that employer-driven plan design, public policy, and product innovation must play a part in the evolution. aToday we must commit to taking the necessary steps to create DC plans that are genuine retirement plans -- plans that effectively turn hard-earned savings into retirement funding.a

About the Survey:

BlackRocka™s second annual Survey of 401(k) Participant Attitudes and Behaviors was conducted via the Internet by Boston Research Group during March 2010. The BlackRock survey is fielded to 1,000 workers who are actively contributing to a 401(k) plan; the poll has a maximum sampling error of +/- 3 percentage points at a 95% confidence level. The poll examined participant views and behaviors regarding retirement planning and saving, retirement confidence levels, and the aspend downa phase of retirement, with key implications for potential plan improvements. If you would like to receive a copy of the survey summary, contact [ Melissa.Garville@blackrock.com ].

About BlackRock

BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At March 31, 2010, BlackRocka™s AUM was $3.364 trillion.BlackRock offers products that span the risk spectrum to meet clientsa™ needs, including active, enhanced and index strategies across markets and asset classes. Products are offered in a variety of structures including separate accounts, mutual funds,iShares^® (exchange traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions^®. Headquartered in New York City, as of March 31, 2010, the firm has approximately 8,500 employees in 24 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company's website at [ www.blackrock.com ].

About Boston Research Group

Warren Cormier is president of Boston Research Group, a leader in retirement industry market research and is also co-founder of the RAND Behavioral Finance Forum along with Dr. Shlomo Benartzi, of UCLA. Warren has more than twenty-five years of quantitative and qualitative experience in financial services research for investment companies (both retail and institutional clients), banks, and insurance companies. He is the author of the Defined Contribution Plan (DCP) plan sponsor satisfaction and market dynamics studies which have become the standard for service quality and trend measurement in the 401(k) arena. He also created similar DCP studies in the advisor and participant channels as well as the highly successful DCP Institute that brings together hundreds of retirement advisors, broker/dealers, asset managers and DC plan providers to network and share creative ideas on practice building and servicing plan sponsors and participants.