"Companies and their retirement plan participants have access to the necessary ingredients to generate successful outcomes in defined contribution plans," said
The MFS survey finds that investors often contribute just enough to receive the maximum employer match. Nearly a quarter (23%) of plan participants surveyed believe that there is no additional benefit to contributing more than is necessary to receive the employer matching contribution. The number jumps to 37% among Generation Y respondents.
The survey also reveals that many investors do not have a clear understanding of target date funds and index funds — two of the most popular retirement plan investment options. Despite the fact that they are often the default option for many retirement plan participants, only 18% of participants believe that investing in target date funds is the ideal way to diversify a 401(k) account. Index funds have also attracted significant investor interest in recent years. However, 65% of survey participants incorrectly believe index funds are safer than the overall stock market, and nearly half (49%) believe index funds have better returns than the stock market.
"Often retirement plans leave too many decisions up to participants, many of whom are ill-equipped to make well-informed decisions," said Venkataraman. "Plan sponsors have a number of tools at their disposal that can help participants better invest for retirement. Creating simplified investment menus, implementing auto-enrollment and auto-escalation contribution plans, and offering professionally managed, diversified investment options will give participants the greatest chance of successfully investing for retirement"
The survey also highlights areas where plan sponsors may be focused on things that participants don't necessarily value. For example, 401(k) loans may not be as important to participants as plan sponsors think. Only 4% of survey participants say they would not participate in their 401(k) plan if their employer did not allow them to take a loan. Loans, even if they are paid back, act as a temporary pre-retirement distribution and can greatly impact a participant's account balance at retirement.
"If you remove or significantly limit the ability to take a loan, you can cut down on the temptation to make short-term decisions, such as using retirement funds for short-term funding needs," said
Please click here to visit MFS.com'sThink Long Term section for additional survey results, whitepapers, videos and other resources.
About the survey
MFS, through Research Collaborative, an independent research firm, sponsored an online survey from
Established in 1924, MFS is an active, global asset manager with investment offices in
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