Guest Blog: Improving U.S. Retirement Outcomes in 360 Degrees
Back in the 1990s, the concept of 360-degree feedback really started to resonate with those in the human resources industry, particularly in the United States. The idea is fairly simple – that the true gauge of an employee’s performance should be based not solely upon the opinion of their manager, but rather on an amalgam of feedback from superiors, subordinates, and peers. The intent is to create a circle of input from those above, below, and around the employee to provide valuable feedback that will allow the employee to improve. As we now stride towards the midpoint of the Twenty-First Century’s second decade, it is the U.S. retirement industry that must adapt this concept to build upon successes of the Pension Protection Act of 2006 (2006 Act) in the goal of creating better retirement outcomes for U.S. savers. This is the primary finding of “A 360 Degree Approach to Preparing for Retirement,” a report authored by my firm, CREATE-Research, and sponsored by the Principal Financial Group.
As defined benefit plans gave way to defined contribution plans, the 2006 Act made great advances in getting U.S. workers enrolled and productively investing for retirement; however, it only went part of the way to help Americans secure better retirements. Improvement of the retirement system cannot reset solely on the backs of plan participants. Nor can the burden of improvement be borne only by plan sponsors, or by financial advisors, or by asset managers. Rather, it will take a 360-degree approach that incorporates input and assistance from all of these stakeholders.
Asset managers need to contribute innovative product-based solutions that demonstrate an understanding of the needs and risk tolerances of their end-clients. Plan sponsors need to improve plan designs to make diversified saving more convenient and intuitive, while also enhancing the participants’ outcomes through better communication and education. Financial advisors’ primary goal for improving the U.S. retirement landscape is to solidify a retirement strategy in the minds of their clients. Too often, retirement is a far-distant goal that remains ill-defined until too late. It is the advisors’ task to help their clients visualize retirement goals and keep them on track towards achieving them. The last and most important stakeholders are the plan participants. The one thing that participants can do to improve their retirement outcomes is this – become more active in retirement planning. This means pushing for more educational activities, developing detailed retirement plans, advocating “autopilot” features like target-date, target-risk, or target-income options.
No one of these stakeholder groups can improve the system on their own. It will only be through purposeful collaboration that the United States can move the needle on retirement preparedness. I encourage you to read the entire report for all the details.
The information in this article has been derived from sources believed to be accurate. Information derived from sources other than Principal Global Investors or its affiliates is believed to be reliable; however, we do not independently verify or guarantee its accuracy or validity.
The information in this article contains general information only on investment matters and should not be considered as a comprehensive statement on any matter and should not be relied upon as such. The general information it contains does not take account of any investor’s investment objectives, particular needs or financial situation, nor should it be relied upon in any way as a forecast or guarantee of future events regarding a particular investment or the markets in general. All expressions of opinion and predictions in this document are subject to change without notice.
Subject to any contrary provisions of applicable law, no company in the Principal Financial Group nor any of their employees or directors gives any warranty of reliability or accuracy nor accepts any responsibility arising in any other way (including by reason of negligence) for errors or omissions in this article.
Links contained in some blog posts may take you to third-party sites and Principal Global Investors makes no guarantees to the accuracy of the information provided.