The prolonged economic downturn has sapped investor confidence that they will not have enough assets for retirement, resulting in conflicting attitudes and behaviors among retirement plan participants, who at once say they are self-directed investors, but admit that their knowledge about investing and financial products is wanting.
Spectrem Group’s DC Participant Insight Series 2012: Attitudes and Behaviors of Retirement Plan Participants finds that more than three-quarters (77 percent) of plan participants surveyed are concerned about having enough money set aside to retirement, while 70 percent are concerned about being able to retire as planned. Less than half (42 percent said they fully expect to have sufficient income to live comfortably in their senior years.
But a majority of plan participants are not seeking the advice of plan providers or financial advisors. Fifty-seven percent said they make their own investment decisions, while 28 percent said they only consult with an advisor in the event of a specific need or event, such as saving for college or retirement. Oddly enough, just under four-in-10 across all age levels said they liked to be actively involved in the day-to-day management of their investments. About the same percentage of those up to age 50 say they even enjoy investing and that it is something they do not want to give up.
And yet 46 percent of those surveyed said they are not very knowledgeable regarding finance and investments. Just over one-third (38 percent) said they are fairly knowledgeable. Of those admitting they are lacking in financial and investment knowledge, the highest percentage were under the age of 35. Those between 35-49 were the most likely to consider themselves just fairly knowledgeable.
This perhaps explains why 49 percent of plan participants surveyed described their risk tolerance as moderate. But just over one-quarter (27 percent) said they aggressively seek high returns and are willing to place a significant portion of their investments at risk. This attitude is especially prevalent amongst those ages 35-49, 32 percent of whom describe their risk tolerance as aggressive. Perhaps this age group feels a more urgent need to “catch-up” due to either losses suffered in the wake of the economic collapse or failure to begin saving early enough to have amassed significant retirement assets.
Women, not surprisingly are much more likely than men to describe their risk tolerance as moderate (57 percent vs. 42 percent), while men are more than twice as likely (36 percent vs. 16 percent) to say they are more aggressive investors (they are also more likely to claim solid financial knowledge).
Also not surprisingly, almost half (49 percent) of those over 50 and up say it is more important that they protect their principal than grow their investments. This is also important to more than one-third (37 percent) of those under 35. But more than four-in-10 of those up to the age of 49 said they are willing to take a significant investment risk on a portion of their investments to earn a higher return.