Lessons learned in higher education

Lessons learned in higher education Voya Retirement Research Institute Study focuses on retirement and financial realities for college and university employees

Our nation s colleges and universities represent a unique work environment. Often employing some of the most creative, educated and respected minds in any given field, our colleges and universities have the noble charge of providing higher specialized education for the 68% of high school graduates who continue on to college. 1 1 Bureau of Labor Statistics, BLS.gov., College Enrollment and Work Activity of 2010 High School Graduates, April, 2010 `

In this report Study Details...3 Unique Personality of Higher Education Workers...4 Decision Influencers...6 Habits, Planning, and Understanding...8 Workplace Retirement Investments...10 Other Investments and Financial Accounts... 12 Expectations for Education and Information... 13 Summary/Conclusion... 14

Institutions of higher education represent a unique working environment for the educators and staff who manage them. Unlike employees in the private sector, where profit is generally a primary organizational goal and motivator, these organizations are dedicated to more altruistic goals and missions in the pursuit of fostering knowledge. Even unlike counterparts in primary and secondary education, or state and local public sector workers, higher education employment is unique given the nature of the education experience, often-specialized areas of expertise, research and publishing focus, and a host of other factors (and often challenges) that can characterize colleges and universities. Voya Financial, as a leading provider of retirement solutions in the higher education environment, commissioned a study of these employees to better understand their thoughts, behaviors, influences and motivations with respect to retirement, financial issues, and the world around them. What emerges is an unprecedented picture of these employees From a personality perspective, when compared to counterparts in primary and secondary education, or to public sector workers in general workers in higher education are more likely to consider themselves risk takers in general, and twice as likely to self-describe their personality type as having a Director personality type (see page 4). Yet, they are no more likely to consider themselves aggressive investors, strongly preferring protection over potential gain with respect to investments. Less than half feel comfortable in making investment decisions without some sort of help or guidance; and they are more likely than other workers to regularly work with a financial professional. Their confidence in their ability to save enough for retirement, and meet other long-term or unexpected financial needs, is much lower than their comfort in their ability to meet everyday financial obligations. Nearly onethird are uncomfortable in their ability to meet these longterm needs, only a half express any degree of comfort. On many retirement and financial confidence, preparedness, and decision-making dimensions, there is a significant difference between faculty and non-faculty employees 02 I

Study Details The Voya Retirement Research Institute commissioned third-party survey vendor Synovate to conduct the research using an on-line panel of 750 fulltime higher education employees age 25 and older, with a roughly equal mix of faculty and staff. Our goals included: To better understand who these employees are, including their personalities, attitudes and who they trust To obtain insights into their economic opinions and spending and savings patterns To examine their financial habits The study was conducted 10/11/11 10/18/11 and results are reported, generally, at +/- 3% at the 95% confidence level. Percentages will not always add up to 100% due to rounding, and for some responses, neutrals have not been included. Higher Education Workplace Demographics Respondents employed in the higher education industry are, on average, 44 years old with a household income of $89,000. 55% are female, 45% are male 74% are Caucasian 65% are married or living with a domestic partner 15% are widowed, divorced or separated 20% have never been married The average household size is 2.8 45% have children younger than 18 living in the household 97% are U.S. citizens They have worked an average of 12.1 years in the higher education industry 19%, nearly one-fifth, have worked in higher education for 20+ years 33%, one-third, for 10-19 years 48% for less than 10 years 73% work for a college or university 12% work in a technical school 15% work in some other form of post-secondary institution 70% report that they work in a public educational institution; 30% in a private higher educational institution Half of respondents are faculty (and 54% of these report that they are tenured) 22% undergraduate-level 12% graduate-level 16% both undergraduate- and graduate-levels Half are staff: 19% academic staff 14% non-academic staff 16% administration I 03

Unique Personality of Higher Education Workers The 2011 higher education study continued employer-segment specific work commissioned by the Voya Retirement Research Institute in 2010, when we looked at K-12 educators and governmental employees. The 2010 work found great similarity among these populations on nearly all dimensions. Overall personality type In looking at employees of higher educational institutions, from a personality perspective, however, we find significant differences. In general, higher education employees are more likely to consider themselves to be risk takers (41% compared to just 17% of K-12 educators). And within the higher education universe faculty (49%) were more likely than non-faculty (32%) to consider themselves attracted to risk. Based on the commonly-used Merrill-Reid personality typing system, higher education employees were twice as likely (as compared to K-12 educators) to consider themselves Directors and significantly less likely to self-describe themselves as Relaters. K-12 Higher education Director: Firm, forceful, confident, competitive, decisive, determined, risk-taker Socializer: Outgoing, optimistic, enthusiastic, like to be in the center of things, loves to talk Thinker: Self-controlled and considerate, prefer analysis to emotion Relater: Good team player, prefer stability to risk, cares greatly about the feelings and needs of others, likeable, not a risk-taker respondents are twice as likely (as compared to non-faculty) to categorize themselves as the Director personality type. are more than twice as likely than faculty to describe themselves as Relaters. 04 I

Investment and risk philosophy With respect to investment philosophy, however, higher education workers were remarkably similar to their K-12 counterparts. And faculty (at 59%) were slightly more likely to consider themselves conservative than non-faculty (52%), and non-faculty were slightly more likely to classify their risk tolerance as moderate. K-12 Higher education The higher education study also examines approach to investing. 57% of higher education employees prefer a largely self-directed approach, only 9% prefer to completely delegate decisions to an investment professional. are twice as likely to take the Do It Yourself (DIY) approach than are non-faculty; and non-faculty are nearly three times more likely to prefer to completely delegate to a financial professional. DIY: I am confident in making my own decisions without research or consulting an investment professional Self-Directed: I do my own research and make decisions without consulting an investment professional Validator: I make my own decisions, but use an investment professional for information or a second opinion Delegator: I completely delegate the decision-making to an investment professional (Note that throughout this report, the and subsets are reported only when there are significant differences between the groups) I 05

Decision Influencers Consideration factors The decision to purchase or invest in a financial product can be influenced by a number of factors. Higher education employees are most strongly influenced by company reputation, their own personal research, investment performance and fees. Recommendations from financial professionals, investment options, prior company experience, and recommendations (from other sources) also play a lesser role in this decision-making process. Company advertising is by far the least powerful decision-influencer for these employees. Plays a strong role Plays somewhat of a strong role and faculty respondents were similarly influenced by all factors with the exception of company advertising faculty reporting that they were more than twice as likely (30%) to be strongly influenced by advertising than non-faculty (13%). 06 I

Instincts These employees rely on their own gut instincts in making investment decisions (49% very or extremely strongly) less than they do to make decisions about what kind of car to buy (65% 2 ), to assess the personality of someone they have just met ( 70%) or to decide if someone is telling the truth (71%). are twice as likely (46%) to rely on professionals in making car purchase decisions than are non-faculty (22%).With respect to financial decisions, faculty are significantly more likely to respond that they rely on their own instincts, input from their peers and from financial professionals that are non-faculty, as evidenced in the graph below. Relies very or extremely strongly on... In general, however, higher education employees are more likely than the general public to report that they are currently working with a financial professional 28% of the general employed public reports working with a financial professional, while 41% of higher education employees do so. Fourty eight percent (48%) of faculty work with a financial professional as does 35% of non-faculty. Information sources Financial products are largely conceptual in nature communicated generally via various docments and information sources. Of the sources most commonly used, higher education employees pay the least attention to prospectuses and premarketing materials. Information 2 However, just 34% rely on the influence of a sales professional to decide what kind of vehicle to purchase. I 07

Habits, Planning, and Understanding Finances and life in general While all employees report checking their bank account and reading their traditional and e-mail with similar frequency, other financial activities are performed far less frequently... and they spend significantly more time: Planning their grocery lists than looking at their budgets Servicing their cars than changing their retirement allocation Going out to dinner than any retirement related planning or monitoring activity Median number of times per year (including never 0 ) % Do Activity Check your bank account Financial habits 100% 96% 92% 86% 80% 86% 249 37 Look at your budget 17 3 2 2 Check your retirement account Figure out how much you need to retire on Examine your life insurance needs Change how you invest your retirement account % Do Activity Other life habits 100% 99% 80% 95% 98% 95% 97% 97% 98% 93% 277 Read your (paper) mail 224 Read your e-mail 145 Plan and write down your grocery list 49 33 Go to gym or exercise Go out to dinner or to a movie 10 8 4 2 2 Take a day trip Take your car in for servicing Have a routine dental checkup Take a vacation Get a physical Generally, higher education employees express greater confidence in their financial ability to meet regular and day-to-day obligations than they do in their ability to plan for long-term events, and unexpected goals. They express the least confidence in their abilities to meet childcare expenses and save enough for retirement but stronger actual lack of confidence in their ability to save enough for retirement, and deal with an unexpected emergency. Very comfortable Somewhat comfortable Uncomfortable and faculty report roughly similar confidence levels with respect to basic needs food, housing, and regular bills., however, are less likely to feel comfortable in their ability to save for retirement in general, especially with respect to saving enough for retirement and being able to deal with an unexpected financial emergency. comfortable not comfortable comfortable not comfortable 83% 83% 80% 80% Feed yourself and your family Pay regular monthly bills 75% 74% 71% 64% 68% 56% 8% 10% 7% 12% 10% 16% 13% 21% 16% Meet housing expenses Pay for basic healthcare 25% Put a little something away for retirement 63% 54% 18% 31% Take a vacation this year 60% 49% 24% 36% Deal with an unexpected financial emergency 58% 43% Meet childcare expenses 58% 44% 10% 13% 22% 35% Save what you think is enough for retirement 08 I

Retirement planning in context Comprehension of retirement-related tasks is also consistently lower than for other life activities. Just half feel that they understand extremely well or very well where their retirement income will come from, and how much they should save for retirement. Extremely/very well Not very/at all well How much money I should be saving for retirement With respect to these retirement-related dimensions, there is a significant difference between the confidence expressed by non-faculty and by faculty in how well they understood these critical issues. Degree of understanding where retirement income will come from and how much they can expect it to be is much higher for faculty Extremely/very well Not very/at all well a pattern that is nearly identical to their understanding of how much they should be saving for retirement. Extremely/very well Not very/at all well Similarly, faculty have given somewhat more thought to where their retirement income will actually come from No thought A little thought Some thought A lot of thought And faculty is twice as likely to have a formal, written financial plan, while non-faculty are more likely to have good intentions, and report that they plan to create one. Yes No, but I plan to create one No I 09

Workplace Retirement Investments Employer-sponsored retirement savings Most higher education employees 59% report that they currently invest in an employer sponsored Defined Contribution (DC) plan, such as a 403(b). Of these, 83% are currently investing in the plan, 87% of faculty and 79% of non-faculty. The average plan balance is significantly higher (more than double) for faculty: $180,400 vs, $79,000 (average for all is $131,600). Similarly, faculty report significantly higher annual contributions to the plan: $8,600 vs. $6,300. (Average annual household income for faculty is, at $99,400, $20,000 higher than for non-faculty.) Still, faculty are significantly more likely to be discontented with the amount they are able to save in the plan. I am happy with the amount I am currently investing I would like to be investing more than I currently am As previously indicated, the average account balance is $131,600. are significantly more likely to report higher balances of $100,000 or more. $50k-$100k Retirement plan design preferences and interests The 403(b) system in higher education institutions can differ from the 401(k) environment in the private sector in that often employees have a choice among vendors / providers. (The private DC system is usually characterized by a single provider / record keeper, while the multi-vendor model is most commonly used in the K-12 retirement system.) With respect to vendor choice, there s literally no such thing as too much choice only a fraction of a percent (0.7%) said that they wished there was less choice. Many felt that the amount of choice was just right, but 42% want more. Those most likely to desire greater vendor choice are faculty and younger employees. 10 I

I wish I had more choices The choices are the right amount I wish I had fewer choices All higher education employees By faculty status By age With the aging of the general population and the beginning of the Baby Boomer retirement surge, just how retirement investors make the transition from accumulation and investment to decumulation and income generation now has an increased focus. Investor interest in options, within a plan, to help build some sort of base for future guaranteed income, is increasing. The majority, 80%, of higher education employees also express an interest in the concept of an investment option that would gradually build a protected account value base and then, at retirement, guarantee a certain amount of income. Traditional pension expectations Nearly three-quarters (73%) of both faculty and non-faculty expect that they will be eligible for traditional pension income from their employer. That expectation, at 81%, is much higher for employees of public educational institutions than for those who work in the private higher education sector (55%). Contrary to what might be expected given today s headlines about the state of the Defined Benefit plan, there is not a decline in the pension expectations among younger employees versus older. 78% of faculty are confident that their pension income will remain stable throughout retirement, although fewer (68%) know how their benefit will be calculated. Still fewer 62% of non-faculty employees report the same confidence, and just 53% know how the benefit will be calculated. I 11

Other Investments and Financial Accounts The majority of higher education employees have the basic savings/checking account (83%) although 87% of non-faculty report having a checking and/or savings account versus 78% of faculty. 69% of higher ed employees overall 75% of faculty and 65% of non-faculty report that they have financial investments other than an employer s retirement plan: Comprehension, or understanding of basic investment vehicles, such as checking / savings account is high but drops significantly beyond these basic vehicles. While many may report that they have some of these investments, they may not feel truly comfortable (i.e. report they know a great deal or fair amount) in their understanding of them. For example, while 73% say they have a Defined Benefit plan, only 45% report even a fair understanding of the concept. 12 I

Expectations for Education and Information Given that the workplace is the source of perhaps the most utilized retirement savings vehicle (the employer-sponsored DC plan), and the increasing importance of individual financial responsibility and planning, how much do higher education employees expect from their employers in terms of financial education? Many would like more financial education from their employers; only a quarter would like less. Retirement savings is the most overall requested topic for additional education, but non-faculty are especially looking for retirement and and investment strategy education. are also less likely to expect financial education from the employer at all. I would like my employer to make more financial education available to me I receive the right amount of financial education from my employer I don t look to my employer to provide me with financial education and non-faculty are largely very similar with respect to how they want to receive information about their investments and lean heavily toward electronic delivery methods. Online, updated daily, so I can get it when I want it Emailed to me in a statement, monthly or quarterly Mailed to me in a printed statement, monthly or quarterly Via phone I 13

Summary/Conclusion As the notion of retirement and personal planning and responsibility for retirement continues to evolve, the retirement systems and solutions of the future will need to be more directly relevant to the end retirement consumer, or employees. Employers and the financial institutions who offer and support workplace retirement systems will need to consider the nature, inclinations, influencers and situations of their unique workplaces. Higher education employees are different than workers in other sectors, even within the educational universe. Retirement solutions for the higher education workplace need to accommodate and embrace those differences. Also, the differences in outlook, confidence and inclination between faculty and non-faculty employees offer critical insights can help institutions and employers design solutions, features and messaging approaches that can help all higher education employees work toward their retirement goals. Visit www.voyaretirementresearchinstitute.com for additional information about this study and other studies that explore participant psychology, emotion, and investment behavior. Additional copies of this report can be downloaded at the Voya Retirement Research Institute www.voyaretirementresearchinstitute.com. Not FDIC/NCUA/NCUSIF Insured I Not a Deposit of a Bank/Credit Union I May Lose Value I Not Bank/Credit Union Guaranteed I Not Insured by Any Federal Government Agency 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. 162497 3022772.E.S-2 2015 Voya Services Company. All rights reserved. CN0703-19857-0816 Voya.com