Ready, Set, Retire

Redefining Retirement Security & Preparation

Despite the distractions of 2020, participants are weathering the challenges

John Hancock Retirement State of the Participant 2021 study highlights retirement security and preparation going forward. Access the report here.

BOSTON, Feb. 22, 2021 /PRNewswire/ – John Hancock Retirement continues to observe retirement readiness in participants despite the impact of the COVID -19 pandemic. Throughout 2020, the majority of the more than 1.1 million participants in over 1,000 John Hancock open architecture defined contribution (DC) plans lost relatively little ground in their efforts to save for a secure retirement.

From October 1, 2019 through September 30, 2020, John Hancock Retirement observed participant behavior and data with a focus on retirement readiness, retirement planning, and retirement investing. John Hancock defines retirement readiness at a plan level as the projected ability for participants to replace 70% or more of their workplace earnings in retirement.* The resulting State of the Participant 2021 study shows that the percentage of participants achieving retirement readiness slipped very slightly from 49.6% on September 30, 2019 to 47.9% on the same date last year.

Reinforcing The Roles Of Engagement

“The data we observed into and through a challenging 2020 is actually quite encouraging,” said Lynda Abend, chief data officer, John Hancock Retirement. “It reinforces the roles that participant engagement, plan design, and the resilience of retirement savers play in keeping people on track toward a secure retirement.”

John Hancock’s State of the Participant 2021 study spotlights the status and behavior of DC plan participants. Its data highlights the positive outcomes of automatic enrollment and increase features the potential of personalized planning, as well as intensive engagement and educational efforts.

Among the findings from the State of the Participant 2021 study:

  • Defined Contribution plans continued to perform their critical role in preparing workers for retirement: Given the widespread impact of the pandemic on personal finances, the dip in retirement readiness, from 49.6% to 47.9%, doesn’t seem too alarming, although it’s certainly worth monitoring closely. Most participants below age 50, along with those earning between $50,000 and $150,000 per year, remain on track for a secure retirement. Participants aged between 30 and 39 were the most retirement-ready at 64 percent, followed by those younger than 30 at 58 percent, and participants aged 40 through 49 at 52 percent.
  • Average account balances tracked the market’s dip and recovery: When global equity markets fell suddenly in the early spring of last year, a very small percentage of participants moved money to non-equity investments. This allowed them to benefit from the eventual rebound and enjoy average account balances that remained close to even in the period from March 1 through September 30. Accounts held by those under age 30 enjoyed the best average return over this stretch, at 5.1 percent. At the other end of the scale, account balances for those 60 and older decreased by 2.6 percent.
  • COVID-19 created a group of participants in need of immediate guidance: Introduced under last April’s CARES Act, the COVID-related distribution served as a financial lifeline for 3.4% of John Hancock’s participant base. Though this percentage was small, our data analytics team calculated that these withdrawals, if not replaced in participants’ accounts, could reduce the plan savings they bring into retirement by as much as 10-13%.
  • Despite all they were dealing with, participants showed an interest in personalized, expense-based planning: John Hancock Retirement launched an interactive planning tool for the plan participants they service that coincided with the emergence of the COVID-19 pandemic. Seven out of every ten participants who sampled the tool proceeded to complete a personalized retirement expense projection. Over 20% of these DC plan savers increased their plan contribution on the spot, at rates that averaged from 4.0-5.2%, depending on age.
  • Digital capabilities have made automatic enrollment easier and more efficient than ever: The auto-increase feature is indispensable in helping shape a “save more” attitude and raising the default contribution rate can help give more new participants a needed nudge. Auto features—such as auto-enrollment and auto increase—are among the most successful strategies for boosting contribution rates and retirement readiness. In fact, plans that combined these auto features enjoyed an eight percentage-point advantage (19% in actual terms) in retirement readiness over plans with no auto features at all.

“We are really pleased to see the continuation of impressive outcomes of auto-enrollment and auto increase,” said Scott Francolini, Head of Strategic Relationship Management and Consulting, John Hancock Retirement. “Even with a backdrop of disruptions that are out of our control, these elements of plan design are relatively easy to implement and can make a big difference on the retirement readiness of participants.”

 

 

 

Methodology
State of the Participant 2021 data was derived from John Hancock’s open-architecture platform, which included 1.1 million participants, 1,076 plans, and $76.6 billion in assets under management as of September 30, 2020.
* John Hancock defines retirement-readiness as the expected ability for a participant’s projected assets at normal Social Security age to replace at least 70 percent of their preretirement earnings. The inputs for this calculation include current age, salary, account balance, participant contribution, enrollment in auto-escalation, employer matching and discretionary contributions, pension eligibility and projected Social Security benefits.
About John Hancock Retirement
John Hancock Retirement is the U.S. retirement business of Manulife Investment Management. For nearly 50 years, we’ve helped people plan and invest for retirement; today, we’re one of the largest full-service providers in the United States.[1] We take a hands-on consultative approach based on the idea that no two plans – and no two plan participants – are exactly alike. We partner with plan sponsors, advisors, and third-party administrators to ensure that every plan is personal to the participant and delivers results.
As of December 31, 2020, John Hancock serviced over 51,000 retirement plans with over 3 million participants and over $205 billion in AUMA.[2]
1 “2020 Defined Contribution Recordkeeper Survey,” PLANSPONSOR, 2020.
2 As of December 31, 2020, John Hancock Life Insurance Company (USA) supported 46,973 plans, 1,566,094 participants, and $102,310,069,468.17 in AUMA. John Hancock Life Insurance Company of New York supported 2,513 plans, 77,833 participants, and $6,052,455,987.28 in AUMA. John Hancock Retirement Plan Services, LLC supported 2,128 plans, 1,393,244 participants, and $97,020,284,307.76 in AUMA. Participant Counts reflect all active participants with a balance. Approximate unaudited figures for John Hancock, provided on a U.S. statutory basis.
About Manulife Investment Management
Manulife Investment Management is the global wealth and asset management segment of Manulife Financial Corporation. We draw on more than a century of financial stewardship and the full resources of our parent company to serve individuals, institutions, and retirement plan members worldwide. Headquartered in Toronto, our leading capabilities in public and private markets are strengthened by an investment footprint that spans 17 countries and territories. We complement these capabilities by providing access to a network of unaffiliated asset managers from around the world. We’re committed to investing responsibly across our businesses. We develop innovative global frameworks for sustainable investing, collaboratively engage with companies in our securities portfolios, and maintain a high standard of stewardship where we own and operate assets, and we believe in supporting financial well-being through our workplace retirement plans. Today, plan sponsors around the world rely on our retirement plan administration and investment expertise to help their employees plan for, save for, and live a better retirement.

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