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CCH® PENSION — 10/09/09

Participants Give Mixed Messages Concerning Investment Principles And Communications

From Spencer's Benefits Reports: A majority of individuals in each of five age categories agree that they do not know as much as they should about retirement investing. While it is not surprising that 76% of people in their 20s agree or somewhat agree with that statement, 69% of people in their 50s and 64% of people in their 60s also agree or somewhat agree that they do not know as much as they should about retirement investing. This was the finding of the 10th Annual Retirement Survey of 3,500 participants for the Transamerica Center for Retirement Studies. The findings of the employer portion of the survey were released in August.

The phrase “know as much as they should” is difficult to quantify when considering how much understanding the participants need to have of asset allocation principles. In the age 60 and older group, 9% had a great deal of understanding of asset allocation principles, while 27% had quite a bit of understanding and 42% had some understanding. A similar understanding of asset allocation principles is found with people in their 50s (8% have a great deal, 21% have quite a bit, and 45% have some understanding); as well as people in their 40s (8%, 18%, and 47%, respectively) and people in their 30s (11%, 19%, and 41%, respectively). Only people in their 20s are more likely not to have much understanding of asset allocation principles (5% have a great deal of understanding, 20% have quite a bit of understanding, and 35% have some understanding).

Awareness of fees that may be charged to their 401(k) plan accounts was low in all age groups: of those age 60 or older only 41% were aware of fees that may be charged to their accounts, but 40% of those age 60 or older were not aware of any fees being charged to their accounts and 19% were not sure. The younger the participant, the more likely he or she was unaware of fees being charged to his or her account: of people in their 20s, 53% were not aware of fees being charged.

Despite lack of knowledge about retirement investing or fees, more than two-thirds of participants in each age category said that their company gives them the right information that they need to make a decision about the retirement plan: 79% of those age 60 and older strongly agreed or somewhat agreed that their company was giving them the right information, compared with 77% of those in their 50s, 69% of those in their 40s, 72% of those in their 30s, and 71% of those in their 20s. However, the survey found that a majority of participants in each age category except those age 60 or older want more information and advice from their company on how to reach their retirement goals. Slightly more than 60% of those age 60 or older either somewhat disagreed or strongly disagreed with the desire for more information from the company.

More than 12 sources of information were used by the survey participants for retirement planning and investing. Friends/family and financial Web sites were the most popular sources of information, followed by financial planners/brokers, print newspapers/magazines, and retirement plan provider Web sites. Information from employers and financial-related television shows were used by an average of 20% of the participants.

People in their 30s, 40s, and 50s tended to use the same sources of information. People in their 20s were more likely to use friends and family (45%), financial Web sites (29%), or no sources (25%). People in their 60s were more likely to use financial planners/brokers (44%), print newspapers/magazines (36%), financial Web sites (30%), and the Web site of a retirement plan provider (28%).

For more information, visit http://www.transamericacenter.org.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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