2018 Wells Fargo Retirement Study

Reframing the planning that creates a successful retirement journey

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NEEDED ON THE JOURNEY

A GPS for retirement

Nothing is more human than the wish for a long, fulfilling life. That ideal—which we call Long Live You—is increasingly within reach. At the same time, the traditional static road map through retirement, built on older assumptions about longevity, pension income, and Social Security, may no longer suffice.

Employees hold great optimism about life in retirement, as well as uncertainty about how to pay for those years. If we can address that uncertainty, we may be able to help people realize the joy that should accompany a longer life.

THE PLANNING MINDSET

Hands on the wheel

The 2018 Wells Fargo Retirement Survey found that employees who gave positive responses to planning questions have considerably stronger financial well-being and are better prepared for and more optimistic about the future. Their answers illustrate the power of a planning mindset. A planning mindset may help people adapt to life changes by identifying near-term and longer-term goals and the steps needed to achieve them.

The power of a planning mindset

2X

more likely to say their financial life is thriving

42%

less likely to have high levels of financial stress

3X

more household retirement savings than people without a planning mindset

In the other lane: employees who didn’t display a planning mindset

are concerned about running out of money

say living to 85 would be a financial hardship

Insights into the planning mindset may help plan sponsors and consultants determine how we can better help employees make retirement a positive chapter while making the journey to and through it less stressful.

THE 401(K)

An engine for asset growth

Many employees already have a powerful engine to pursue asset growth. A 401(k) plan encourages consistent contributions and offers diverse investments. Using it can help support a healthy retirement portfolio.

Our survey found that people value and trust their 401(k)

92%

feel more secure about retirement because they have access to a 401(k)

61%

of 401(k) contributors say they’re saving enough for retirement

38%

of non contributors say they’re saving enough for retirement

This powerful saving and investing tool has helped employees, but many still need targeted help putting their retirement savings plan and other tools to use effectively. For example, they might need help balancing retirement preparation with paying off burdensome student loan debt or expensive college tuition.

Now is the time for employers and providers to build the tools that can illuminate the road ahead, improving the journey for everyone.

PLANNING THE JOURNEY

Change the goal from surviving to thriving

When planning for retirement, many employees set a goal of survive when they could aim to thrive. They may set their sights low due to any number of challenges: health problems, college debt, family responsibilities, or career changes.

Generation X is especially vulnerable. Along with battling the same challenges other generations face, its members are too young to have high levels of access to pensions, but too old to have had all the benefits of automatic plan features that would have helped them save at a younger age.

To thrive, employees need more than education. They need action. And they need more than a plan. They need a planning mindset to adapt to unexpected developments. The retirement community can help them develop that mindset.

Gen X employees need help, and they know it

45%

say they have a detailed financial plan (a lower percentage than other generations)

63%

say they want more help from employers with their retirement choices

ACTION STEPS

Action steps for the retirement industry

The retirement industry has long aimed to empower employees as they build toward the future. Typically, we’ve focused on education and encouragement. This approach may work for people who already have a planning mindset. The rest of the population may benefit from more strategic, targeted help.

The following steps can help your plan support the Long Live You goal for your participants.

1. Consider whether your plan design positions employees for success. The building blocks of modern 401(k) plans include:

  • Auto-enrollment
  • Default contribution rates of 6% or higher
  • Auto-escalation
  • Employer match structured to encourage high deferral rates
  • Solutions that guarantee income and help retired employees draw down assets

2. Help participants cultivate a planning mindset.

  • Ask your participants whether they agree with these planning mindset statements:
    • I am able to work diligently toward a long-term goal.
    • I prefer saving for retirement now to ensure I have a better life in retirement.
    • It makes me feel better to have my finances planned for the next one to two years.
    • In the past six months, I have set and achieved a goal or set of goals to support my financial life.
  • Use participants’ responses to gauge where they stand with respect to a planning mindset.
  • Throughout 2019, look for tools and research from Wells Fargo Asset Management that will help you encourage planning mindset behaviors for various types of employees, transforming education into action.

Download the Retirement Study

Help make Long Live You a reality for employees.

At Wells Fargo Asset Management, we’re conducting research to understand the needs of employees and employers and develop solutions that can deliver improved outcomes for all.

Together we can answer the call and help improve the journey and the outcomes for your employees.

To reach a Wells Fargo Asset Management Defined Contribution team member, please email us.

Download the full study