Survey finds more than half worry about employees running out of money in retirement
Employers may help improve retirement outcomes by adding guaranteed lifetime income options
NEW YORK, (april 19, 2017) —The first Not-for-Profit Plan Sponsor Insights Survey* by TIAA finds that the No. 1 concern among plan sponsors in the not-for-profit (NFP) sector is that employees will delay retirement because they do not have enough money (64 percent), and 59 percent are concerned their employees will run out of money in retirement—far more than the 38 percent who worry about meeting responsibilities as a plan fiduciary.
The survey reveals opportunities for plan sponsors that may help improve employees’ retirement outcomes with in-plan guaranteed lifetime income options, wider adoption of employee education and advice programs, and strategic measurement. It also examines plan sponsors’ concerns about meeting their fiduciary responsibilities.
Helping to ensure employees have access to income for life
The survey sheds light on changes that could help increase employees’ retirement preparedness and help allay employers’ concerns. More than half of NFP plan sponsors offer a plan with a guaranteed lifetime income option, and the majority (87 percent) say they plan to keep it.
Those who do not provide a lifetime income option in their plan include 34 percent who say participants can access annuities outside of the plan and 21 percent who believe fees are too high.
However, these responses reflect some common myths about annuities. Lifetime income options offered through a workplace retirement plan can offer benefits that employees may not find through retail financial solutions, and, in most cases, have lower fees.i
“We have been working with not-for-profit institutions for nearly 100 years, and we share their dedication to helping their employees pursue financial security,” said Ron Pressman, CEO of Institutional Financial Services at TIAA. “With many people living 20 years or more in retirement, a successful retirement strategy may benefit from a source of income for life. And we’ve seen that employees who contribute to an annuity through their retirement plan over time can generate more retirement income than those who simply purchase one upon retiring.”ii
Plan sponsors may also want to re-think their expectations for how employees will draw down their savings. One-third (35 percent) expect their employees to generate retirement income only through systematic withdrawals. Although taking steady withdrawals can be part of a larger retirement income strategy—for example, to cover discretionary expenditures—relying on this method comes with the risk of outliving one’s savings.
Additionally, plan sponsors may be overlooking an especially important feature for employees who don’t feel they have the knowledge or interest to choose investments on their own. Only 48 percent of sponsors have a designated default investment option, which can provide unengaged employees with a convenient way to invest for retirement.
Plan sponsors also may consider making an investment with a lifetime income option their plan’s default option, but 56 percent of those surveyed say they are not sure if they would adopt such an option. These plan sponsors could be overlooking the fact that default investment options that offer an income for life feature are designed specifically to help improve retirement outcomes. This is especially important considering that 35 percent of individuals holding target-date funds (the most common default option*) expect them to guarantee a monthly income check for the length of their retirement.iiiProviding education and advice
Survey results also show plan sponsors recognize the crucial role personalized support and advice play in employee outcomes. However, many are unsure of the best way to engage their employees: 81 percent of plan sponsors offer one-on-one financial advice services, yet 71 percent say getting their employees engaged in the plan is a significant challenge.
That may be because of a gap between the methods plan sponsors believe to be effective and what they have in place:
- 68 percent believe financial education designed specifically for different age groups or life stages is effective; however, only 33 percent offer it.
- 50 percent believe financial education designed specifically for women is effective, but only 14 percent offer it.
“Plan sponsors can work with their providers to offer a comprehensive employee engagement program and identify services that may be most effective for their specific employee populations,” Pressman said.
Measuring success
Fifty-five percent of plan sponsors consider it a significant challenge to measure the success of their retirement plan. When asked about the most important measure of a plan’s success:
- 27 percent of sponsors cite participation rates, with 52 percent tracking these rates for their plan.
- 21 percent say participant income replacement rates/retirement income adequacy is the most important measure, but only 14 percent track these rates.
“Participation rates are important, but they are just a starting point. The true measure of plans’ effectiveness is whether employees have adequate income throughout their retirement, and feel secure in knowing they won’t outlive their savings. The yardstick for plan success should reflect these goals,” said Pressman.
Ongoing tracking of income replacement rates better enables employers to know if their employees are on track for retirement. Most experts recommend that employees aim to replace 70-100 percent of their preretirement income during retirement. However, 47 percent of sponsors surveyed think their employees should target an income replacement rate of 70 percent or less.
Fiduciary focus
As plan sponsors focus on preparing their employees for retirement, results reveal they are also working to ensure they meet their fiduciary responsibilities and offer compliant plans. Last year’s introduction of the Department of Labor (DOL) Fiduciary Rule has brought heightened attention to fiduciary practices, and these concerns are top of mind for many.

** Through fixed annuity products. Guarantees are backed by the claims-paying ability of the issuing company.
- 38 percent of NFP sponsors worry about meeting responsibilities as a plan fiduciary.
- 31 percent are concerned about the impact of the DOL rule.
- 24 percent worry about criticism regarding plan administrative and investment fees.
However, these concerns still rank below core plan goals like getting employees through retirement. That may be because many plan sponsors report strong and disciplined plan management practices, such as conducting formal reviews of their plan options and services. Plan sponsors report that over the next 12 months they will conduct a formal review of their:
- administrative fees (39 percent),
- investment menu (39 percent),
- investment fees (38 percent), and
- plan design (34 percent).
It is generally a good idea for plan sponsors to formally review their plans every few years to help ensure they are offering competitive services and are meeting their plan obligations.
Sixty-five percent of plan sponsors have an Investment Policy Statement (IPS) in place to guide their investment monitoring and selection process, and 12 percent plan to create one in the next 12-24 months. They look to experts for support, too. Eighty-six percent report having a plan advisor and of those, 88 percent report the advisor is a fiduciary.“Plan sponsors play a critical role in preparing their employees for a secure retirement,” said Pressman. “TIAA’s experience with clients generally shows that effective plan management, along with lifetime income options, thoughtful engagement programs and success metrics, can increase their ability to deliver successful retirement outcomes for their employees.”
For more information about the 2017 Not-for-Profit Plan Sponsor Insights Survey by TIAA, read the executive summary .
*The survey was conducted by KRC Research from January 18 to February 17, 2017, via a phone survey of 835 plan sponsors in the not-for-profit sector. Following are the sample sizes and margin of error for the total sample and each subgroup.

** Through fixed annuity products. Guarantees are backed by the claims-paying ability of the issuing company.
About TIAA
TIAA (TIAA.org) is a unique financial partner. With an award-winning1 track record for consistent investment performance, TIAA is the leading provider of financial services in the academic, research, medical, cultural and government fields. TIAA has $938 billion in assets under management2 (as of 3/31/2017) and offers a wide range of financial solutions, including investing, banking, advice and education, and retirement services.