MassMutual LGBTQ Retirement Savings Risk Study

J U N E 2018 MassMutual Retirement Savings Risk Study RS-45520-00

Background & Methodology Background To better understand the investment preferences and philosophies of Americans approaching retirement as well as retirees, MassMutual commissioned a survey of pre-retirees within 15 years of retirement and of retirees no more than 15 years into retirement. Methodology On behalf of MassMutual, Greenwald & Associates, an independent research firm, conducted an online survey of the general population of pre-retirees (804 pre-retirees) and retirees (801 retirees). Respondents were drawn from ResearchNow s online panel. To qualify for the survey, all respondents had to be at least 40 years old. Pre-retirees were required to have a household income of at least $40,000, work full-time for a private sector employer, and be participating in that employer s DC retirement plan. Retirees were required to have total investable assets of at least $100,000. They had to be retired from a private sector employer and participating in that employer s DC retirement plan at the time of retirement. The survey fielded in January 2018. This survey also included oversamples of some key sub-groups of the population, including members of the community. Between the main sample and oversample, we collected 315 interviews from respondents, including 149 pre-retirees and 166 retirees. 2

Key Findings respondents are more confident overall about their retirement income. Both respondents and the general population believe that their savings will last a median amount of 25 years, however respondents plan to spend fewer years in retirement (22 years). This may explain why LGBT respondents are slightly more likely to agree that their retirement income will last as long as they live (71% vs. 65%). respondents are more likely to take more risk than they should when investing (31% vs. 22%). Among the pre-retirees, respondents are more inclined to presume that their retirement income will last as long as they live (66% vs. 56% of pre-retirees in general). pre-retirees believe that they ll need between 75% and 90% of their pre-retirement income to live comfortably in retirement (32% vs. 15% of retirees). However, retired respondents report needing less than half of their pre-retirement income (33% vs. 6% of pre-retirees). pre-retirees plan to retire later than the general population with six in ten saying they will retire in 11 to 15 years (62% vs. 49%). The general population is more likely than respondents to say they plan to retire within the next 5 years (20% vs. 10%). Among retirees, respondents are more inclined to aim for their investments to significantly outperform the market (17% vs. 9%) and express concern over stock market volatility (76% vs. 64%) than the general population. 3

Key Findings respondents are less likely to seek investment assistance from a professional financial advisor. respondents are more likely than the general population to report they are currently not working with any professional financial advisors (44% vs. 35%). Of those working with a financial advisor, respondents are more likely to be advised to change their investment mix as retirement approaches (62% vs. 49% of general population). When it comes to investing, respondents actions do not always match their preferences. respondents focus more on growth than preservation when investing (65% for at least moderate growth vs. 8% for preservation) and they focus on growth more than the general population (52%). However, when asked which theory comes the closest to how they approach retirement investing, more respondents chose the conservative option (42% Theory A) over the growth focused option (28% Theory B). 4

respondents worry most about health care costs and not having enough money to enjoy themselves in retirement. Greatest Worry About Retirement Years General Population Health and long-term care costs 26% 32% Not having enough money to enjoy yourself Running out of money Losing the ability to be active Being in poor health 22% 21% 18% 16% 15% 14% 13% 14% Feeling less useful Losing touch with family and friends 4% 2% 2% 2% What is your greatest worry about your retirement years? (General Population n=1,605; LGBT n=315) 5

Seven in ten respondents believe that they will have enough retirement income to last as long as they live. pre-retirees are more apt than all pre-retirees to believe that their retirement income will last as long as they live (66% vs. 56%). Agree/Disagree Strongly agree Somewhat agree Somewhat disagree Strongly disagree (I know how to/i did) claim Social Security at the right time to optimize my income LGBT 21% 28% 47% 46% 24% 17% 7% 9% My retirement income will last as long as I live LGBT 13% 11% 52% 60% 28% 21% 7% 8% I have enough money to meet my retirement lifestyle goals LGBT 14% 12% 48% 56% 29% 23% 9% 8% I am not worried about financing my retirement LGBT 10% 12% 36% 40% 39% 36% 15% 12% To what extent do you agree or disagree with each of the following statements? ( n=1,605; LGBT n=315) 6

Like other pre-retirees and retirees, only about a third of respondents believe they need 75% or more of their pre-retirement income to live comfortably in retirement. retirees are more likely to report needing less than 50% of their pre-retirement income to live comfortably in retirement (33% vs. 6% of pre-retirees), while LGBT pre-retirees believe they ll need 75% to less than 90% of their pre-retirement income (32% vs. 15% of retirees). Pre-Retirement Income 16% 13% 27% 33% 24% 18% 26% 28% 6% 8% 1% <0.5% Less than 50% 50% to less than two-thirds (65%) Two-thirds (66%) to less than 75% 75% to less than 90% 90% to 100% More than 100%/More income than when you were working [IF PRE-RETIREE] About what percentage of your pre-retirement income do you think you will need to live comfortably in retirement? [IF RETIREE] Now that you re retired, about what percentage of your pre-retirement income do you find you need to live comfortably? ( n=1,605; LGBT n=315) 7

respondents believe that their savings will outlast their years in retirement by a median of 3 years. Expected Years of Living Comfortably in Retirement vs. Years in Retirement Years savings will last General Population Years in retirement Years savings will last Years in retirement Less than 10 10-19 3% 2% 14% 18% Median Years in Retirement 24 22 Less than 10 10-19 <0.5% 2% 12% 28% 20-29 30-39 23% 28% 15% 13% Median Years Savings Will Last 25 25 20-29 30-39 30% 26% 18% 14% 40-49 50 or more 5% 2% 3% <0.5% Income Gap -1-3 40-49 50 or more 3% 7% 2% 1% Not sure/no way of knowing 37% 36% Not sure/no way of knowing 34% 27% Based on all of your sources of income in retirement, for how many years do you think your savings and investments will provide enough income for you to live comfortably in retirement? ( n=1,605; LGBT n=315) 8

Retired respondents are more likely than all retirees to be concerned about stock market volatility. pre-retirees are more apt to express concern over making a poor investment decision that leads to significant loss (57% vs. 41% retirees). Level of Concern Very concerned Somewhat concerned Not too concerned Not at all concerned Major losses in the value of your investments right before you retire* 38% 37% 43% 45% 16% 14% A major downturn in the stock market 30% 34% 47% 46% 19% 16% 4% 4% Stock market volatility 21% 27% 51% 47% 23% 22% 5% 4% Making a poor investment decision that leads to significant loss 19% 19% 35% 34% 37% 36% 9% 11% Taking too much investment risk 14% 14% 31% 33% 45% 44% 10% 10% How concerned are you about each of the following [IF PRE-RETIREE: in retirement]? ( n=1,605; LGBT n=315) *Asked of pre-retirees only 9

Eight in ten respondents are comfortable with at least some investment risk. Investment Risk I am comfortable taking a high level of investment risk, in order to have the possibility of high investment returns 8% 9% I am comfortable with some investment risk, in order to have the possibility of above average investment returns 68% 72% I am only comfortable with a little investment risk, even though I know I have to accept below average investment returns 16% 21% I cannot accept any investment risk, and I am willing to accept very low investment returns 3% 4% Which statement comes closest to describing how comfortable you are when it comes to taking investment risk? ( n=1,605; LGBT n=315) 10

Two-thirds of respondents describe their current investment mix as growth-focused. Current Investment Risk Aggressive growth 10% 15% Moderate growth Balance between growth and preserving your money 42% 50% 37% 27% Preservation with some growth Completely focused on preservation Not sure 7% 5% 2% 3% 2% 0% How would you describe the investment mix you currently have? ( n=1,605; LGBT n=315) 11

Nearly all respondents want their investments to continue growing after they retire. pre-retirees are more likely than retirees to agree with workers significantly cutting back how much they invest in equities as retirement approaches (62% vs. 46%). Agree/Disagree Strongly agree Somewhat agree Somewhat disagree Strongly disagree I want my investments to continue to grow even after I retire 59% 65% 38% 32% It is important to take steps to ensure you do not suffer major stock market losses right before you retire 40% 41% 54% 55% 6% 4% As workers approach retirement, they should significantly cut back how much they invest in stocks and stock mutual funds 9% 10% 45% 48% 38% 33% 8% 9% To what extent do you agree or disagree with each of the following statements? ( n=1,605; LGBT n=315) 12

retirees are more inclined to target their investments to significantly outperform the market than retirees in the general population (17% vs. 9%). Aim for Investments NET: Outperform the Market -65% LGBT-65% 52% 47% 32% 31% 13% 17% 3% 4% 1% 0% Significantly outperform the market Slightly outperform the market Match the market Slightly underperform the market Significantly underperform the market When it comes to your investments, do you aim for them to...? ( n=1,605; LGBT n=315) 13

respondents, more so than the general population, believe they are taking more investment risk than they should. Level of Investment Risk You are taking much more risk than you should You are taking somewhat more risk than you should 2% 3% 20% 27% NET: Taking More Risk -22% LGBT-31% You are taking the right level of risk 58% 65% You are taking somewhat less risk than you should 11% 10% You are taking much less risk than you should 2% 1% When it comes to your investments would you say that? ( n=1,605; LGBT n=315) 14

Yet, respondents tend to believe they should be significantly more conservative with their investments in retirement. respondents are more apt to say Theory A comes closest to how they approach retirement investing than Theory B (42% vs. 28%). Preferred Approach to Retirement Investing Theory A: Become significantly more conservative with their money because they need to withdraw income and may not be able to replace assets when the market drops Theory B: Do not be substantially more conservative with their money because they could live a long time after retirement and need to grow money Net: Theory A 41% LGBT 42% 26% 29% 30% 28% 27% Net: Theory B 31% LGBT 28% 26% 16% 13% 4% 2% Completely follow Theory A Follow Theory A more than Theory B Follow Both Equally Follow Theory B more than Theory A Completely follow Theory B Which of the following comes closest to how you approach retirement investing? ( n=1,605; LGBT n=315) 15

respondents are less likely than respondents in general to work with an advisor. Respondents overall tend to work with one advisor more so than respondents (56% vs. 47%). Number of Advisors Plan to Work With Advisor in Future General Population One 47% 56% Yes 31% Two 7% 7% No 69% More than two None 2% 1% 35% 44% No 63% Yes 37% How many professional financial advisors do you currently work with that advise on investments? ( n=1,605; LGBT n=315) [IF NO ADVISOR] Do you plan to work with a professional financial advisor in the future? ( n=496; LGBT n=106) 16

Six in ten respondents were advised to change their investment mix as they approached retirement, notably more than the general population. respondents were advised to invest conservatively, more so than respondents overall (87% vs. 78%). Advisor Recommended Changing Investment Mix While Approaching Retirement General Population Recommended Changes to Investment Mix No 51% Yes 49% That you invest more conservatively 6% 10% LGBT That you invest somewhat more conservatively 68% 81% No 38% Yes 62% That you invest somewhat more aggressively That you invest more aggressively 2% 0% 13% 20% [IF HAS ADVISOR] Has/Did your advisor recommended/recommend changing/that you change your investment mix as you approach retirement? ( n=1,109; LGBT n=209) [IF YES] What did your advisor recommend when it came to the mix of your investments? ( n=616 ; LGBT n=126) 17

Two in three respondents prefer an an easy-touse investment option Retired respondents are more likely than pre-retirees to strongly agree that they prefer to delegate financial decisions (26% vs. 8%). Agree/Disagree Strongly agree Somewhat agree Somewhat disagree Strongly disagree I would prefer an easy-to-use investment option 15% 11% 55% 54% 26% 28% 5% 6% I enjoy figuring out how to best invest my money 14% 16% 44% 45% 33% 32% 9% 6% I prefer to delegate financial decisions to a professional, rather than do it myself 17% 12% 36% 39% 32% 27% 16% 21% To what extent do you agree or disagree with each of the following statements? ( n=1,605; LGBT n=315) 18

Six in ten respondents find TDFs appealing. More find passively managed and actively managed mutual funds appealing. retirees are more inclined to find passively managed mutual funds appealing than retirees overall (83% vs. 71%). Appealing Types of Investments Very appealing Somewhat appealing Actively managed mutual funds 24% 23% 53% 53% 78% 77% Passively managed mutual funds 21% 18% 55% 61% 77% 79% Customized investments where the money manager automatically customizes the allocation 19% 19% 52% 50% 71% 70% Target date funds (TDFs) 17% 20% 47% 43% 64% 62% How appealing do you find each of the following investment types? ( n=1,605; LGBT n=315) 19

Comparable to others, nearly two-thirds of respondents are familiar with TDFs. retirees are more likely than all retirees to be familiar with actively managed mutual funds (93% vs. 82%). Familiarity with Different Types of Investments Very familiar Somewhat familiar Not too familiar Not at all familiar Actively managed mutual funds 28% 48% 18% 5% 32% 50% 14% 4% Passively managed mutual funds 25% 46% 22% 7% 26% 52% 18% 4% Target date funds (TDFs) 22% 27% 35% 36% 28% 22% 14% 16% Customized investments where the money manager automatically customizes the allocation 18% 21% 43% 45% 29% 24% 10% 10% How familiar are you with each of the following investment types? ( n=1,605; LGBT n=315) 20

Nearly half of respondents and respondents overall are invested in actively managed mutual funds. A third are invested in TDFs. Investments in Different Funds Actively managed mutual funds 47% 46% Passively managed mutual funds 43% 45% Target date funds (TDFs) 26% 32% Customized investments where the money manager automatically customizes the allocation 25% 27% [IF PRE-RETIREE] Do you have any funds invested in any of the following? [IF RETIREE] At the time that you retired, did you have funds invested in any of the following? ( n=1,605; LGBT n=315) 21

respondents say TDFs are easy to use and are good investments due to not having the discipline to adjust their investments themselves. respondents, more so than all respondents, strongly disagree with the sentiment that TDFs are a default option if employees do not pick their own investments (16% vs. 8%). Target Date Funds (TDFs) Agree/Disagree Strongly agree Somewhat agree Net: Disagree Not sure TDFs are easy to use TDFs are a good investment because I might not have the discipline or timeadjust my investments myself 13% 14% 22% 27% 47% 44% 41% 37% 13% 16% 24% 25% 24% 20% 16% 17% TDFs are a default option if employees do not pick our own investments 13% 11% 25% 28% 22% 27% 40% 34% I don t like TDFs because I would rather manage the money myself 11% 14% 29% 28% 44% 38% 16% 20% My employer encourages employees to invest in TDFs 6% 8% 19% 14% 38% 40% 38% 37% I wish TDFs were more personalized 5% 7% 37% 38% 24% 21% 34% 34% Most of the people I know at work are in TDFs 4% 5% 19% 16% 30% 30% 47% 49% [IF FAMILIAR WITH TDFs] To what extent do you agree or disagree with each of the following statements regarding Target Date Funds (TDFs)? ( n=1,378; LGBT n=261) 22

respondents are slightly more likely to have committed a bad plan behavior. pre-retirees, more so than LGBT retirees, have taken a hardship loan while saving in a retirement savings plan (22% vs. 4%). Have you ever? NET: Bad Savings Behavior - 25% LGBT - 31% 75% 69% 15% 19% 17% 10% 6% 7% Withdrawn money to cover a big expense, like purchasing a home or tuition Taken a hardship loan, like in a financial emergency Suspended contributions (after a withdrawal or other reasons) None of these Have you ever taken any of the following actions while saving in a 401(k) or other defined contribution retirement savings plan? Please select all that apply. ( n=1,605; LGBT n=315) 23

respondents are substantially less likely to own life insurance, or any of the financial products listed. respondents are more likely than the general population to not own any of these products (22% vs. 13%). Products Owned Life insurance A defined benefit retirement plan or traditional pension plan 46% 44% 54% 69% An annuity Long-term care insurance None of these 24% 30% 20% 20% 13% 22% Do you currently own any of the following insurance or financial products? ( n=1,605; LGBT n=315) 24

Demographics of Respondents Age General Population (n=1,605) LGBT (n=315) 40-54 53% 69% 55-64 32 18 65-74 12 12 75+ 3 1 Gender Male 48% 72% Female 52 28 Employment Status Employed full-time 73% 74% Employed part-time 1 1 Not employed 25 26 Education Some high school or less <0.5% <0.5% High school graduate 9 4 Some college/trade or technical school 29 18 College graduate (4-year degree) 40 46 Graduate or professional degree 21 31 25

Demographics of Respondents Retired General Population (n=1,605) LGBT (n=315) Yes 27% 26% No 73 74 [IF PRE-RETIREE] Within how many years do you expect to retire? (n=804) (n=149) 5 years or less 20% 10% 6 to 10 years 31 28 11 to 15 years 49 62 [IF RETIREE] For how many years have you been retired? (n=801) (n=166) 5 years or less 55% 54% 6 to 10 years 25 31 11 to 15 years 20 15 26

Demographics of Respondents 2017 Household Income General Population (n=1,605) LGBT (n=315) Less than $30,000 <0.5% <0.5% $30,000 to $39,999 1 <0.5 $40,000 to $49,999 2 1 $50,000 to $74,999 25 20 $75,000 to $99,999 20 22 $100,000 to $124,999 18 21 $125,000 to $149,999 12 13 $150,000 or more 23 24 Savings and Investments Less than $50,000 9% 4% $50,000 to $99,999 6 4 $100,000 to $149,999 7 7 $150,000 to $199,999 6 4 $200,000 to $249,999 8 8 $250,000 to $499,999 19 20 $500,000 to $999,999 21 29 $1 million or more 22 22 Prefer not to say 2 1 27

Demographics of Respondents Hispanic, Spanish, or Latino Descent General Population (n=1,605) LGBT (n=315) Yes 5% 9% No 95 91 Racial/Ethnic Background White/Caucasian 89% 89% African-American/Black 5 3 Asian/Indian/Pacific Islander 5 2 Other <0.5 5 28

Demographics of Respondents Sexual Orientation General Population (n=1,605) LGBT (n=315) Heterosexual or straight 93% 1% Gay 3 57 Lesbian 1 21 Bisexual 1 21 Prefer not to say 2 -- Transgender or Transsexual Yes <0.5% 4% No 99 96 Prefer not to say 1 <0.5 Marital Status Married 75% 47% Divorced or separated 10 5 Single, never married 9 26 Not married, but living with a partner 4 20 Widowed 2 2 29

Demographics of Respondents [IF MARRIED OR PARTNER] Household Decision-Making on Financial Matters You make most of the decisions with little or no input from another household member You take the lead and discuss decisions with another household member General Population (n=1,288) LGBT (n=225) 34% 39% 35 34 Decisions are made in total partnership 30 27 [IF MARRIED OR PARTNER] Spouse s/partner s Employment Status Employed full-time 61% 66% Employed part-time 7 4 Not employed 32 29 [IF MARRIED OR PARTNER] Spouse/Partner Retired Yes 36% 30% No 64 70 30

Demographics of Respondents Do you currently own any of the following insurance or financial products? Please select all that apply. General Population (n=1,605) LGBT (n=315) Life insurance 69% 54% A defined retirement plan or traditional pension plan 46% 44% An annuity 24% 30% Long-term care insurance 20% 20% None of those 13% 22% Until what age do you think that you can expect to live? Before 70 1% 2% 70 to 79 5 10 80 to 85 27 30 86 to 89 4 6 90 to 95 24 20 96+ 3 4 Not sure/no way of knowing 36 27 Are you currently receiving Social Security retirement benefits? Yes 18% 14% No 81 86 Not sure <0.5 -- 31

Demographics of Respondents At what age (do you think you will /did you) claim your Social Security retirement benefits? General Population (n=1,605) LGBT (n=315) Before 63 16% 21% 63 to 65 22 22 66 to 69 30 32 70+ 14 15 Not eligible 1 1 Not sure 16 8 Actions Taken While Saving in a 401(k) or Other Defined Contribution Retirement Plan Withdrawn money to cover a big expense, like purchasing a home or tuition 15% 19% Taken a hardship loan, like in a financial emergency 10% 17% Suspended contributions (after a withdrawal or other reason) 6% 7% None of these 75% 69% 32

Demographics of Respondents Nature of Occupation General Population (n=1,605) LGBT (n=315) Professional or technical 28% 26% Mid-level or lower level Manager 22 25 Senior Manager 14 13 Administrative 12 6 Other white collar 8 11 Blue collar 7 6 Executive 5 9 Service worker 2 3 Sales or retail <0.5 <0.5 Medical or nurse <0.5 -- Customer service <0.5 -- Business owner <0.5 -- Teacher <0.5 -- Clerical <0.5 -- Something else 1 2 33

Demographics of Respondents Industry General Population (n=1,605) LGBT (n=315) Manufacturing/Production 18% 10% Business and financial 15 15 Health care 10 8 Computer technology 7 5 Services industry 7 8 Engineering 4 3 Technology (other than computer) 4 6 Construction and maintenance 4 3 Legal 3 3 Agriculture 1 <0.5 Arts and entertainment 1 2 Education 1 <0.5 Life sciences 1 1 Physical sciences <0.5 2 Social services <0.5 <0.5 Architecture <0.5 1 Mathematical or statistical <0.5 -- Social sciences -- 1 Other 23 31 34