Empower: Resilient retirement savers focus on short-term needs

GREENWOOD VILLAGE, Colorado–(BUSINESS WIRE)–Rising prices and inflation are certainly hurting American workers, but despite the economic environment, Americans remain resilient — and more than 63% of Americans are confident they are financially on track for retirement .

Today, Empower released its second annual research study Empowering America’s Financial Journey™ – How People Save, Invest & Get Advicewhich analyzes the behavior of approximately 4.3 million active defined contribution members (primarily corporate) to better understand their savings habits and level of involvement in retirement planning, particularly in an economic environment and financially very difficult.

“When the economy is in a downturn, American workers need guidance and support to dissuade them from making financial decisions that could negatively affect them,” said Edmund F. Murphy III, President and CEO of Empower. “Despite the challenges facing our country, it is encouraging to see that most savers have not changed their approach to investing and are still focused on saving and planning for their future.”

Here’s what we learned:

• Engagement continues to matter a great deal. Savings rates for engaged participants are 56% higher than for unengaged participants. They are also more likely to take full advantage of their plan’s employer match.

  • 48% of unengaged participants do not fully utilize employer matching compared to 22% of those who are engaged.

• The people engaged and exploiting the educational content; ask for advice or guidance; and/or aggregated or consolidated accounts have higher savings rates than people who are not engaged. Participants who aggregate accounts—those who link multiple financial accounts in one place to create a consolidated view—have savings rates approaching 11%, nearly double the savings rate of unengaged participants.

  • 44% of survey respondents feel more confident if they had a complete picture of their financial situation and were able to see their financial account balances, debts and assets in one place.

• Changing demographics and the rise of Gen Z are reshaping the DC landscape. Gen Zers as a percentage of active Empower participants more than doubled between 1Q20 and 3Q22 (4.0% to 8.9%). This trend will accelerate as Gen Z is expected to make up 30% of the workforce by 2030.
• Advisors make the difference and help drive better results. People who use an advisor compared to those who don’t are more likely to:

  • Feel more confident that they are saving enough in their 401(k) plan and in making investment decisions.

  • See themselves as having a higher level of investment knowledge.

  • Be more confident about their preparation for retirement.

• The number of participants who take out loans increased by 13% in the last 12 months and hardship withdrawals jumped by 24%. More than a quarter of respondents surveyed say they are very or somewhat likely to take out a loan or withdrawal in the event of hardship over the next six months.

“Through this year’s study, we found that nearly half of Americans have reduced their daily expenses, created a budget or reduced their entertainment, and one in five baby boomers and Gen Xers have postponed their retirement,” said Luis Fleites, director of Thought Leadership. to Empower. “I think it illustrates that while we’re focused on spending and planning for the short term at the moment, most savers are still trying to stay focused on the long term.”

The goal of this analysis was to understand how participants behave and what motivates that behavior and, therefore, what insights and learnings can help American workers on their journey to a secure retirement.

To do this, we overlaid two data sources:

• Empower’s record-keeping data on 4.3 million active participants in primarily corporate plans.

• A nationally representative survey of 2,505 American workers.

To download the study to find out more.

About Empower

Headquartered in the Denver metro area, Empower administers approximately $1.2 trillion in assets¹ for over 17 million pension plan members¹ and is the second-largest pension plan accountant in the nation by total number of participants.² Empower serves all segments of the employer-sponsored retirement plan market: 457 government plans; Taft-Hartley plans; small, medium and large business 401(k) customers; 403(b) non-profit entities; private label registrar clients; and IRA customers. Personal Capital, a subsidiary of Empower, is an industry-leading hybrid wealth manager. For more information, please visit empower.com and join us on Facebook, Twitter, LinkedIn and instagram.

1 As of September 30, 2022. Information refers to all retirement businesses of Empower Annuity Insurance Company of America (EAIC) and its subsidiaries, including Empower Retirement, LLC; Empower Life & Annuity Insurance Company of New York (ELAINY); and Prudential Retirement Insurance & Annuity Company (PRIAC), marketed under the Empower brand. EAIC’s total consolidated assets under administration (AUA) were $1,240.5 billion. AAU is a non-GAAP measure and does not reflect a company’s financial stability or strength. As of June 30, 2022, EAIC’s statutory assets totaled $77.2 billion and liabilities totaled $74.3 billion. ELAINY’s statutory assets total $6.9 billion and liabilities total $6.7 billion. PRIAC’s statutory assets total $82.1 billion and liabilities total $80.8 billion.

2 Pensions & Investments 2021 Defined Contribution Survey Ranking as of April 2022.

On August 1, 2022, Empower announced that it was changing the names of various companies within its group of companies to align the names with the Empower brand. For more information regarding name changes, please visit empower.com/name-change.

Securities, when featured, are offered and/or distributed by Empower Financial Services, Inc., Member FINRA/SIPC. EFSI is a subsidiary of Empower Retirement, LLC; Empower Funds, Inc.; and Registered Investment Advisor Empower Advisory Group, LLC. This document is provided for informational purposes only and is not intended to provide investment, legal or tax advice or recommendations.

Empower refers to the products and services offered by Empower Annuity Insurance Company of America and its subsidiaries, including Prudential Retirement Insurance and Annuity Company and Empower Retirement, LLC. All product names, logos and brands are the property of their respective owners.

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Learn more: To learn more about how we are empowering plan sponsors and their members to participate in their retirement plans more than ever, call us at 800-719-9914.