PLANADVISER - July/August 2021 - 14

trends
Participant Misperceptions
Distinguishing myth from reality can be hard when it comes to DC plans
financial wellness provider.
Many
advisers
say
these
and
other misconceptions, such as what
deferral rate to choose, can be largely
resolved through automatic enrollment
and automatic escalation. Still,
it is not enough to use auto-features
without also providing communication
and advisory support.
Another
potentially
confusing
feature of retirement plans that
precludes people from participating
is the vesting schedule, especially
when a participant must wait years
to receive the employer match, notes
Erik Daley, managing principal at the
Multnomah Group.
On top of this, he says, there is
no single agreed-upon calculation for
making the retirement income projections;
recordkeepers must provide
these on participants' statements
starting this fall, under the Setting
Every Community Up for Retirement
Enhancement (SECURE) Act.
" While the intention and purpose of
these projections is good, the assumptions
going in will greatly diverge and
could confuse some participants and
give others a false sense of security, "
Daley says. " Some participants may
even think these projections are a
guarantee of income. "
Another misconception, says
David Swallow, managing director
of consulting relations and retention
ADVISERS with their plan sponsor clients have to conquer
many fiduciary and plan design basics when setting up a
retirement plan. Yet they might not think about the misconceptions
that participants have about these plans and retirement
saving-which could impede setting savings goals.
" Some of the most harmful misconceptions that participants
have have to do with feeling that retirement plans are
so complicated that a person can't make prudent decisions, "
says Molly Beer, an executive vice president in the retirement
plan consulting practice at global insurance brokerage
Gallagher. " The mere idea of using the plan to get themselves
to retirement can feel overwhelming. "
Additionally, young participants may feel that retirement
is so far away, they can put off starting to save, says
Christian Mango, president of Financial Fitness for Life, a
at TIAA, is that low-cost investing is superior and it will
always lead to higher portfolio balances-even a larger pot
of money at retirement. " We think low-cost investments
should be part of a diversified lineup, but they don't always
translate into better performance, " Swallow says.
Hand in hand with this challenge is participants' pursuit
of the current best-performing funds, Daley says. Those
funds might look good now, but that does not mean they are
the best option.
On the subject of annuities, Swallow says the retirement
plan industry is now coming around to the idea of prompting
those who reach retirement to purchase an annuity outside
of the plan. Through its many surveys, TIAA has found that
69% or more of employees place guaranteed income as a top
retirement goal, he says.
14 | planadviser.com July-August 2021 Art by Kiki Ljung
http://www.planadviser.com
PLANADVISER - July/August 2021

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