To be a force for change, we must first understand the mind-sets and challenges of participants. Explore our thought leadership below to gain insights on the experiences and motivations of today's workers and retirees.

Retirement Savings And Spending Study

Our latest research, Retirement Savings and Spending, Part 3, the third of our annual participant surveys, T. Rowe Price examines the attitudes and behaviors of 401(k) plan participants to provide insights for plan sponsors and their advisors.

Focus On Two Key Areas:

Participants And The Advice They Want

An important finding in the 2017 study shows a new trend in how participants view the kinds of advice and support they want for helping with their financial priorities.

See Why.
Participants and Their Financial Priorities

An important finding in the 2017 study shows that participants' multiple, conflicting financial priorities demonstrate the need for financial wellness strategies.

See Why.

GenX No Longer Forgotten

Our latest research, HR Perspectives: A Survey of Larger 401(k) Plans, offers a unique view of the challenges Human Resources and Benefits professionals face when assessing how well their plans are helping participants prepare for retirement.

Focus On Three Key Areas:

How Metrics Can Affect Retirement Preparedness

Plans that set specific goals around participants' retirement readiness and have metrics in place to measure them are more likely to achieve their goals.

See Why.
How The Relationship With Retirees Is Changing

Traditionally, the employer-employee relationship often ended at retirement, but today it's evolving toward a continuum of service beyond retirement.

See Why.
How Plans Combat Big Savings Challenges

Asset leakage, such as withdrawals and cash-outs, remains an obstacle to participants' retirement preparedness, but plans are overcoming this challenge.

See How.

A look at how new retirees are making it work.

How are new retirees managing in retirement? Research by T. Rowe Price suggests they're faring quite well. In fact, many 401(k) participants are transitioning with considerable assets and high satisfaction.

A quantitative, national study, First Look: Assessing the New Retiree Experience, offers compelling data on the spending behaviors and experiences of people who have been part of the 401(k) system and are now—on average—about three years into retirement. While the research reflects a diverse range of investors, ages under 50 to 75 and older, the majority are baby boomers 50 to 68 years old.

This context is critical for plan sponsors and advisors: It provides valuable perspective on the early years of retirement and, in particular, the transition to retirement based on a unique 401(k)-affiliated sample.

Summary: A Developing Positive Picture

Overall, the research shows a positive picture of retirement, especially in terms of the adjustments that retirees have made at this early stage. They are moving confidently into retirement and managing their spending according to their income:

  • Many enter retirement with substantial household assets ($1,303,000 average/$473,000 median).
  • Almost half (48%) have a withdrawal plan, and they are withdrawing a median of 4% of their portfolio.
  • 80% say they track expenses carefully, and only three in 10 are surprised by how hard it is to live without their preretirement paycheck.

Attitudinally, these individuals are in a good place. Nearly 90% of survey respondents say they are satisfied with their retirement so far, and almost three-quarters feel they are better off financially than their parents were at the same age. However, single households, particularly female-headed, report significant challenges.

Top Findings: Five Insights You Should Know

Here are five key findings from the First Look research that show that new retirees who have saved in 401(k)s are making the first years of retirement work for them. According to the study:

  • Retirees are living on an average of 66% of preretirement income.
  • Those with a withdrawal plan draw a median of 4% of their balance.
  • 85% say they don't have to spend as much in retirement to be satisfied.

  • 89% have found they can adjust their lifestyle according to income.
  • 78% reduce spending if spending exceeds their income.

  • 21% are working.
  • 14% are seeking work.
  • 65% are fully retired.

  • 63% stick to a spending budget.
  • 33% maintain an emergency fund.
  • 52% have a financial advisor.

  • 89% of retirees are satisfied with retirement so far.
  • 78% feel on track to meet their financial goals.
  • 74% feel better off than their parents were at their age.

Conclusions: Retirees Are Making It Work

"While we know there are people with little or no retirement savings, our sample indicates that many who saved in a 401(k) plan are entering retirement with considerable assets," said Anne Coveney, vice president, Client and Market Insights, T. Rowe Price Retirement Plan Services, Inc. "What's more, we are also seeing some evidence of financial discipline in budgeting and spending."

The analysis captures a moment in time—many new retirees have yet to tap their 401(k) balances and use Social Security as their main source of income. Nonetheless, the study results send a powerful message to plan sponsors, advisors, and especially those individuals still preparing for retirement.

"New retirees are making retirement work—it is possible to save in a 401(k) plan and enter retirement in a positive state," Coveney said.

Methodology: A Look Behind the Study

T. Rowe Price initiated First Look: Assessing the New Retiree Experience, a quantitative study, conducted independently by Brightwork Partners LLC.

Interviewees included 1,030 working adults age 50 or over who are currently contributing to a 401(k) plan, or are eligible to contribute, and have a balance with their current employer of $1,000 or more and 1,507 adults who have retired in the past one to five years and have a Rollover IRA or a balance remaining in a 401(k) plan.

Interviewing was conducted between February 19 and March 3, 2014. Findings in both samples are subject to a margin of error of just under 3%.

Redefining the digital generation.

Working millennials, who are saving in a 401(K) plan, are challenging stereotypes, outpacing expectations.

Our latest research, The Millennial Retirement Saving and Spending Study, reveals surprising data that indicate many working millennials who are saving in a 401(k) appear to be well positioned for long-term financial success. Contrary to widespread stereotypes that characterize them as "entitled" and "living for the moment," our study shows that working millennials are well-intentioned savers who are optimistic about reaching their financial goals.

Overall, this is good news. But while this group possesses a positive attitude about their current and future financial status, our research also indicates that they lack some of the knowledge needed to go it alone. According to our study, this segment of the millennial generation may rely on automated plan services to get them started—and nudge them along in the right direction—as well as advice and guidance to keep them on track.

Five key findings worth your attention

Working millennials are indeed saving for the future, but also want and need direction to reach their goals. According to the study:

They are not just living for the moment
  • Contribute 8% of pay on average (6% median), about the same as Gen X workers (8% average, 7% median)
  • 79% say that they save money by cutting flexible expenses (entertainment, travel, and eating out), and 67% save by any means possible
  • 74% say they are more comfortable with saving and investing extra money
Most see a bright financial future
  • 78% are somewhat or very comfortable that they are on track to meet their financial goals
  • 73% say they are better off financially than their parents at the same age
  • 72% believe they will receive some Social Security benefits when they retire, but not as much as what today's retirees get
This group is engaged, not entitled
  • 63% commit to purchasing only what is on their shopping list
  • 68% say they shop by going to the store for preselected items that they research online
  • 88% indicate that they are pretty good living with their means and 82% are confident that their spending is well within the limits of what they can afford
They are open to advice and guidance
  • 38% have already used some kind of advisor
  • 11% have used a robo-advisor alone or in conjunction with a traditional advisor
  • 84% plan to make managing their financial situation a higher priority, this year
They embrace auto-services
  • Of those who were auto-enrolled in their 401(k) plan, the average opt-out auto-enrollment deferral rate was 6%; however, 27% of respondents said they would not opt out of auto-enrollment until 10%
  • 47% wish they had been enrolled at a higher rate; however, those auto-enrolled at rates below 3% are very sensitive to increases in the deferral rate
  • 80% believe their employer should set the auto-enrollment default to take full advantage of the company match

Are you in step with this generation?

To help ensure your plan makes the most of these findings, focus on three key areas: plan design, guidance, and participant engagement.

Refer to the study synopsis for a more in-depth review of the results as well as detailed next steps you can take to align your plan with our latest thinking.

Conclusions

Based on the research, working millennials are sending a clear message: They've been unfairly burdened with a reputation for being financially irresponsible particularly when it comes to saving and spending.

"Working millennials are so receptive to saving for retirement and are generally practicing good financial habits," says Anne Coveney, senior manager of retirement thought leadership at T. Rowe Price. "When they have the means to do the right thing, it appears that they do. What's more, they recognize they need help to overcome saving challenges. Given this group's openness to education and services that help them make decisions, the door is wide open for sponsors and advisors to step in and help them become financially independent."

Methodology

Research is based on a national sample of workers and retirees comprised of the groups below. The on-line survey was conducted in February and March 2015 (totaling 4,308 respondents):

3,026 workers currently contributing to a 401(k) or who are eligible to contribute with at least $1,000 in a 401(k):

  • 1,505 Millennials
  • 1,007 Gen Xers
  • 514 age 50+ workers

Findings in the samples are subject to a margin of error of just under 3%.

NEW STUDY EXPLORES PLAN SPONSORS' COMMITMENT TO RETIREMENT PREPAREDNESS

Our latest research, HR Perspectives: A Survey of Larger 401(k) Plans, offers a unique view of the challenges Human Resources and Benefits professionals face when assessing how well their plans are helping participants prepare for retirement.

Focus On Three Key Areas:

How Metrics Can Affect Retirement Preparedness

Plans that set specific goals around participants' retirement readiness and have metrics in place to measure them are more likely to achieve their goals.

See Why.
How The Relationship With Retirees Is Changing

Traditionally, the employer-employee relationship often ended at retirement, but today it's evolving toward a continuum of service beyond retirement.

See Why.
How Plans Combat Big Savings Challenges

Asset leakage, such as withdrawals and cash-outs, remains an obstacle to participants' retirement preparedness, but plans are overcoming this challenge.

See How.