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Triangle Perception vs. Reality

Published on: July 6, 2017

The popular phrase “perception is reality” is often used to express the idea that how things really are is based on a person’s perspective. While this may be true in certain areas of life, this statement is simply not true when it comes to retirement planning. Plan sponsors often make assumptions regarding their employees’ levels of understanding on various aspects of retirement planning. Such aspects include an employee’s understanding of available plan investment options, individual retirement goals, savings requirements, and plan effectiveness. Consequently, plan sponsors must ask themselves, “Does my perception of plan participants’ understanding of retirement goals and investment options match up with their reality?” The truth is, perceptions of plan sponsors are often inconsistent with what their participants truly think. In fact, a recent study conducted by BlackRock and published in their 2016 DC Pulse found that the discrepancies can be quite stark between plan sponsors’ perceptions and the reality of what participants actually think about their retirement plan.

For instance, one of the most important issues for employees to consider regarding retirement planning is whether or not they are saving enough to have a secure retirement. *BlackRock’s survey found that while 59% of plan sponsors believed the majority of their plan participants’ savings were adequate, only 28% of employees thought they were saving enough. The survey results also revealed a large perception gap in the number of participants who knew how much money they would need during retirement: 64% of plan sponsors thought their employees understood the amount of money necessary to achieve their retirement goals whereas only 37% of employees responded that they understood. Plan sponsors significantly overestimate their employees’ understanding of plan investment options as well with 67% of plan sponsors responding they think their participants understand their investment options. Not surprisingly, only 43% of participants felt they understood the investment options offered by their plan.

The fact that plan sponsors and employees report such drastic differences should alert sponsors that they are likely operating from inaccurate perceptions of their participants. These differences can lead to frustrations for both plan sponsors and participants when plans do not adequately meet participant needs. But the good news is by pinpointing these misperceptions plan sponsors can implement strategies to correct them more effectively. Now more than ever participants are looking for help when it comes to retirement savings. Only one out of three participants are satisfied with plan support for monitoring and changing their savings rates and 42% would be interested in getting help determining how much they should contribute to their plan.

These survey results should motivate plan sponsors to re-evaluate whether or not their assumptions are consistent with their participants’ actual experience. By better understanding the participants’ perceptions, plan sponsors can implement solutions to make more meaningful improvements to their participants’ retirement outcomes.

*Source for all data: BlackRock DC Pulse Survey, September 2015. The conclusions are intended to provide an indication of the current attitudes of a sample of U.S. plan sponsors and participants about retirement saving and investing and should not be relied on for any other purpose.

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FINRA/SIPC.


Written by Brandon Nicklas
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