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TIAA-CREF Survey: Increasing Number of Americans Unfamiliar With the Investment Options in Their Retirement Plan
New York, February 26, 2015 — A recent survey by TIAA-CREF reveals that nearly half of Americans (46 percent) are concerned about running out of money in retirement. Some of this concern may be justified by the fact that 39 percent of Americans say they are not familiar with their retirement plan investment options — an increase from 33 percent in 2014.
Alarmingly, despite the number of people who are unfamiliar with the investment options in their retirement plan, the vast majority of respondents (85 percent) say they feel comfortable with the choices they have made. This gap highlights individuals' need for advice and education on how to save enough to create a steady stream of income in retirement.
The TIAA-CREF 2015 Investment Options Survey was conducted by an independent research firm and polled a random sample of 1,000 adults nationwide to assess their attitudes, preferences and behaviors related to investment options in their retirement plans.
Advice and education can help Americans achieve desired outcomes
Of the 39 percent of Americans who said they are not familiar with all of the investment options in their retirement plan, a remarkable 42 percent said they chose how to invest their savings themselves. Meanwhile, 31 percent of respondents overall said they have made no choice at all, placing their savings in their employer’s default investment option.
The survey also reveals that nearly 40 percent of Americans feel they have either too many or too few options in their retirement plan. As a result, individuals may be overlooking important options that could benefit them.
"People may be missing out on options that could help ensure they will achieve their goals, or they could be choosing the wrong options for their particular situation," said Teresa Hassara, executive vice president of TIAA-CREF''s Institutional Business at TIAA-CREF. "Advice and education can make an enormous difference in helping people ensure that their strategy and mix of investments will fulfill their expectations for retirement."
Target-date funds offer a simple, single investment choice
One option that can be an important part of a diversified investment menu is a target-date fund. Target-date funds offer individuals the opportunity to choose a fund, based on their planned retirement date, that automatically adjusts over time to ensure an individual is appropriately diversified. According to the survey, only 35 percent of Americans are familiar with target-date funds, and just 10 percent say they are invested in one.
Those who are invested in the funds were asked to evaluate what they find most appealing about them. Of that group, 36 percent said it’s the professional management that automatically and appropriately rebalances investments over time, while another 33 percent highlighted the ease and convenience of a single investment choice as being most appealing.
"It's unfortunate that more people aren't taking advantage of target-date funds, because they offer a simple, effective investment option for many people," said Hassara. "Target-date funds eliminate the need for individuals to make complicated investment, allocation and rebalancing decisions each year."
Those invested in target-date funds can still benefit from professional advice. The Investment Options Survey found that 83 percent of people who have a target-date fund also have savings in other investments.
"Even though target date funds are easy to use," said Hassara, "for those who have other investments, an advisor can help ensure that the portfolio is properly allocated. An advisor can also help people explore lifetime income options that will guarantee that they won’t run out of money."1
Advice and education can also help individuals choose the target-date fund that aligns with their goals, such as helping their savings continue to grow through retirement: 37 percent of respondents invested in target-date funds want their fund to grow slightly more conservative but continue investing for growth as they approach retirement, while another 24 percent want their fund to continue investing for growth without growing more conservative. It’s clear, however, that many people do not realize there are differences between funds: Only 55 percent of Americans who are invested in target-date funds recognized that various funds differ in their investment mix.
"While target-date funds are designed with a similar purpose, not all target-date funds are the same, and choosing the right one for your situation is important," said Hassara. "People today are living longer and facing retirement horizons that could last more than 25 years, so they need an investment choice that recognizes that reality. It's important to choose a target-date fund that maintains growth investments through retirement to avoid becoming too conservative too early in one's life."
TIAA-CREF helps individuals plan for their financial well-being and build their confidence by offering a variety of resources and interactive tools related to financial advice and goal-setting. In addition to its online Advice and Guidance Center, TIAA-CREF offers educational programs focusingon trending financial issues and organizes financial empowerment workshops for women. The company offers access to financial consultants via phone and at more than 100 offices across the country.
For more information on the survey, please read the 2015 TIAA-CREF Investment Options Survey Executive Summary. For more information on TIAA-CREF's Advice and Guidance offerings, visit our Advice and Guidance Center.
The survey was conducted by KRC Research by phone among a national random sample of 1,000 adults, age 18 years and older, from Jan. 7-13, 2015, using a combination of landline and cell phone interviews. The margin of error for the entire sample is plus or minus 3.1 percentage points.
TIAA-CREF (www.tiaa.org) is a national financial services organization with $851 billion in assets under management (as of 12.31.14) and is a leading provider of retirement services in the academic, research, medical and cultural fields.