Redefining Retirement Readiness

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1 Redefining Retirement Readiness Employers and workers alike can benefit from expanding their view of Retirement Readiness from simply offering and participating in a plan. Workers want and need additional support and guidance from a broader, holistic perspective, particularly with respect to retirement. They would welcome, and appreciate it if their employers made that support available to them. And employers themselves might just discover that introducing Retirement Readiness support can help improve worker appreciation, morale and productivity.

2 In this, the first in a series of Retirement Readiness reports from the Voya Retirement Research Institute, we examine how workers feel about their own retirement and financial situations, what they look for with respect to support and guidance, and how they would respond to employers who offer them additional retirement readiness support. Partnering with IPSOS Loyalty (an independent market research firm, and not a member of the Voya Financial family of companies), The Voya Retirement Research Institute surveyed 1,510 workers age 25 and older during June of Respondents had a (combined, where relevant) household income of $40,000 or higher. Except where indicated, all data in this report are derived from this study. Respondent Demographics % Age % % Gender Male Female 43% 57% Income ($000) $40-$100 $ % 60% White 75% Ethnicity African American Asian 8% 6% Hispanic 10% Marital Status Married or Living as Married Single, Never Married Previously Married (Divorced or Widowed) 13% 10% 77% In this report Financial Confidence... 1 Retirement is a Priority...3 Employer Help Welcome...7 Workplace Productivity & Employee Satisfaction Boost...10 Employees Want... and Need... More.. 12 Parental Status No Children at Home Children at Home Children Younger than 18 at Home Children Older than 18 at Home 19% 47% 43% 53%

3 Financial confidence Retirement is a key employee priority and concern. It is also the financial aspect of their lives in which they express the least confidence. Generally, less than one fifth of workers (18%) express strong confidence in their financial situations overall. About half (55%) are somewhat confident, but about a quarter (27%) are actively not confident about their financial situations. Confident in my Financial Situation Not 27% Very 18% Somewhat 55% Most workers studied 80% report some degree of financial distress. Financial Distress None 20% High 11% Overwhelming Low 33% Moderate 32% And the majority are only somewhat comfortable (55%), or not at all comfortable (10%), making financial decisions. Only a little more than a third (37%) are very comfortable making financial decisions. Confidence Making Financial Decisions Not 10% Very 36% Somewhat 5 I 01

4 Financial confidence (continued) Retirement, and meeting unexpected financial emergencies, are two areas in which individuals may be especially vulnerable. Retirement is the aspect of financial life in which individuals express the least confidence in their ability to manage; only 55% say that they feel that they are very or somewhat confident that they are saving enough for retirement, and just 71% that they are able to save at all for retirement. Roughly two-thirds, or 63% are more confident in their ability to confront an unexpected financial emergency. The majority are confident that they are able to manage regular expenses, food (96%), housing (9) and regular bills (93%). That confidence, especially at the lower end of the scale, may be tempered Not even one fifth (17%) were very confident that they were saving enough for retirement. Confidence in Ability to... Confident (Somewhat & Very) Very Confident Not Confident Feed family 68% 96% Maintain housing payments 6% 63% 9 Pay monthly bills 7% 62% 93% Afford medical expenses 12% 47% 88% Enjoy moderate extras (eating out, movies) 18% 41% 82% Save a little for retirement 29% 33% 71% Take a vacation this year 29% 37% 71% Deal with an unexpected financial emergency 3 23% 63% Save enough for retirement 45% 17% 55% 02 I

5 Retirement is a priority Retirement is a key worker priority and concern, regardless of age. When asked what their #1 savings goal was, 39% of respondents answered Retirement, with Debt Reduction a distant second at 25%. Altruistic financial goals helping family and even children s education, fall far behind, with Children s education being the primary financial goal for just 10% and helping family for 2%. (That s not to say that other goals aren t important, and don t play some part in financial planning.) #1 Savings Goal Retirement 39% Pay off debt 2 Buy house / pay off house 20% Children's education 10% Medical expenses 5% Help extended family / parents 2% Retirement occupies much of workers thought, and their worries. They think about what they will do when they retire, while at the same time, they worry about maintaining their lifestyles. A little more than half (57%) are confident that their retirement is going to be great, but only half (49%) say that they are saving enough to retire when they want to and the way they want to. Thoughts About Retirement Retirement is an important savings goal for me 89% I worry that I won't have enough savings for a comfortable retirement lifestyle 75% I am saving for retirement but I wish I could afford to save more 7 I am confident that I am managing my financial life well 66% I have thought a lot about what I will do when I retire 61% I feel overwhelmed when I think about retirement saving 60% I am confident that my retirement is going to be great 57% I am confident that I'm saving enough to retire when I want to and the way I want to 49% Employees take a holistic view of retirement, thinking of it as part of their overall financial picture, and are very open and receptive to additional financial guidance, especially via their employers. At the same time, they are mostly dissatisfied with the financial guidance they currently receive from their employers. Only 29% are very satisfied. I 03

6 Employee Sentiment about Retirement and Workplace Financial Guidance Retirement is a priority (continued) 87% I think about retirement investment and savings as part of my overall financial picture 7 I would like help managing all of my retirement accounts and options 75% I welcome any help managing my life that my employer offers 7 I would use a phone or internet based financial guidance resource my employer made available Despite insecurity, low savings confidence and generally wanting help, fewer than half of workers report that they currently access advice and guidance via any source. Current Access to Financial Advice / Guidance Via... Access No Access Web 41% 59% Friends & family 35% 65% Employer's retirement plan 33% 67% Financial advisor or planner 23% 77% Financial firm 19% 81% Through employer 19% 81% Seminars / workshop attendance 11% 89% Other financial professional (i.e. CPA, banker, stockbroker, insurance agent) 10% 90% Social media 6% 9 Spouse or partner's retirement plan 6% 9 Spouse or partner's employer 96% 04 I

7 Employer help welcome Employer-Offered Financial Guidance Service Most feel it would be useful Few have it today But they would use it if they had it Employees express a strong interest that it would be helpful to access financial guidance and educational services via their employers, especially with respect to retirement investing, saving and planning. 62% report that it would be useful if their employers offered help with investing in the retirement plan and help understanding how much they will need for retirement. 56% and 55%, respectively, indicated that help managing retirement and general investments would be useful. 48% would felt the same about help understanding how to generate retirement, and 4 about help managing their current, overall financial obligations. Only 12% felt that none of these services would be useful. This Would be a Useful Service for an Employer to Offer 12% 48% 4 56% 55% 62% 62% Helping invest in the retirement plan Helping understand how much will be needed for retirement Helping understand how to manage retirement investments overall Helping understand investments in general Helping understand how to generate retirement income Helping manage current financial obligations None of these Significantly fewer indicate that these or similar services are currently available through their employers. Just 26% report that they have access to supplemental help in understanding the retirement plan at all, fewer report access to tools that would help them understand how to reach their goals, or understanding retirement income about the same percent as report that their employer makes work-life balance assistance available. Least likely to be offered is help in understanding the non-financial aspects of retirement. I 05

8 Employer help welcome (continued) Employer Currently Offers Offers Doesn't Offer 77% 7 85% 79% 79% 23% 26% 15% 21% 21% Tools to help me understand how to reach my retirement goals Additonal help understanding retirement plan Help understanding nonfinancial aspects of retirement Help understanding where retirement income will come from Help managing work-life balance At the same time, a wide majority of workers would use these specific services if they were available in their workplace. Would be Likely to Use if Offered by Employer Access to tools to help me understand my retirement goals 8 Additional help understanding the retirement plan 82% Help understanding the non financial aspects of retirement 73% Help understanding where retirement income will come from 80% Help understanding different ways to save and invest 81% Help managing work-life balance 69% 06 I

9 Workplace productivity & employer satisfaction boost Money and finances clearly play a role in today s workplace. Financial concerns can be a workplace distraction. 83% of workers express that they spend at least some time every week, at work, thinking about personal finances. # of Hours Per Week, At Work, Thinking About Personal Finances 23% 3 spend five or more hours, each week, at work, preoccupied with personal finances. 8% 17% 17% 18% 16% Personal finances can consume, in aggregate and in total, significant amounts of employee time, and 6% of repondents report that they have actually called in sick because of financial stress. Money problems occupy 10 or more hours each week for nine percent of workers. Specfically, working hours spend on hours on their own financial situations: 56% on money problems 50% with retirement worries 72% checking their financial accounts 71% paying personal bills 68% generally managing personal finances Hours Per Week, at Work... Money Problems Retirement Worries Checking Financial Accounts Paying Personal Bills Managing personal financial life 10% 8% 1 13% 1 5% 5% 7% 7% 5% 7% 9% 2% 2% 29% 29% 32% 25% 29% 37% 4 50% 45% 48% There may be an additional benefit for employers who choose to offer holistic financial guidance services for their employees: Increased employee loyalty and productivity. Nearly a third of employees (31%) say that financial guidance in the workplace would decrease the time they spend on their personal finances during the work week. For very few, just 1, would this guidance increase their work-time dedicated to personal finances. I 07

10 Workplace productivity & employer satisfaction boost (continued) Financial Guidance in the Workplace Would (Impact on amount of time at work thinking about personal finances) Increase 1 Decrease 31% Have no impact 55% More than half of workers who currently do not have comprehensive, holistic financial guidance offered by their employers report that the availability of these services would increase their satisfaction with their employer. The effects of these services, interestingly, on satisfaction, is even stronger for employees to whom they are available. Respondents were also given the option would decrease satisfaction or has a negative impact, and in no instance did more than select the negative impact. Average of negative impact responses: 2.5% Anticipated and Actual Impact on Employer Perception of Key Guidance Services Would increase my satisfaction with my employer Tools to help me understand my retirement goals Additional help understanding the retirement plan Help understanding the non-financial aspects of retirement Help understanding where my retirement income will come from Help understanding different ways to save and invest Help managing my work-life balance My employer offers, and I appreciate it 49% 57% 56% 59% 59% 59% 6 69% 68% 71% 73% 73% 08 I

11 Only 50% of workers agree that My employer has my best interests at heart. Offering an additional benefit of financial guidance can help employers improve this perception; 51% of workers (who do not currently have such guidance available through the workplace) say that they be more likely to feel that their employer was looking out for their best interests if this service were available; a third would worry less and roughly one-fifth say they would be less distracted at work, and less likely to change employers or look for another job. Reduced productivity costs businesses about $15,000 per year per affected employee. -PSCA Insight, Kent Smetters, 2011 If Employer Offered Guidance, I would... Feel more like my employer has my best interests at heart 51% Worry less 3 Be less distracted at work 22% Be less likely to change employers or look for another job 18% Retirement benefits are integral in driving satisfaction with an employer. It s a top five satisfaction driver for 66% of workers, even moreso than health and dental benefits. Benefits Most Influential to Employer Satisfaction Employer match to retirement plan 66% 81% Health and dental benefits Paid vacation Retirement savings plan 46% 46% 62% I would have a more positive impression of my employer if they offered a more comprehensive set of retirement and financial services benefits and options Pension plan 43% Life / Disability insurance 32% 75% Retirement guidance on my entire portfolio Personalized financial guidance 22% 22% A workplace retirement savings plan is one of my top considerations when reviewing an employer s benefit plan Maternity / paternity leave 13% I 09

12 Employees want... and need... more The workplace, the nature of retirement, and the role of the employer in enabling retirement readiness are changing. While the responsibility of retirement funding is increasingly on the individual, many people are unprepared to appropriately accept that responsibility. While retirement is important to them, they can be overwhelmed by a host of factors and may not know where to turn for guidance or what to do. Even in the best of times, finances are complicated and confusing. These aren t the best of times. As the role of the employer changes employers have a new opportunity to help their workers by enhancing benefits platforms to include the holistic guidance employees desire and need. And by enabling broader Retirement Readiness planning, employers may also enjoy the benefits of improved productivity, satisfaction and morale. Additional copies of this report can be downloaded at the Voya Retirement Research Institute VoyaRetirementResearchInstitute.com. This paper has been prepared by the Voya Retirement Research Institute for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults, (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities. The opinions, views and information expressed in this commentary are subject to change without notice based on market conditions and other factors. The information provided is not a recommendation to buy or sell any security. Products and services offered through the Voya Financial family of companies X.G Voya Services Company. All rights reserved. CN Voya.com