Defined Contribution Insights: Modest Expectations for Plan Participants

Diane Gallagher
Diane Gallagher
Vice President, DCIO
Practice Management

An American Century Investments® study shows that practical retirement savings advice is more important to plan participants than brochures that paint an unrealistic view of life after retirement.

Retirement Life Is Not a Beach

Think about the images on defined contribution plan enrollment brochures: hammocks, golf courses, happy retirees on the beach. Retirement looks wonderful! Surprisingly enrollment materials laced with images like these may be falling flat. Why? Most plan participants are not on a path to get there—and they know it.

Expectations Are Modest for Retirement Plan Participants

An American Century Investments study of pre-retirees reveals that most plan participants aren’t counting on a resort lifestyle during retirement. Indeed, 88% of pre-retirees expect their financial situation to be about the same or a little worse than it is today. Further, less than 1% expects their standard of living to be much better than it is today. These results fly in the face of romanticized enrollment materials: most participants are not expecting to sail off into the sunset.

Few Believe Their Standard of Living Will Be Better in Retirement

A key goal for plan sponsors is for everyone who is eligible to participate more fully in the retirement plan. You want participants to save enough and invest in a way that helps them prepare for the future. But, to be more persuasive, you need to look carefully at words and images you’re using. Trying to conjure images of the luxury resort lifestyle in retirement may not ring true. It may be more appropriate—and resonate better—to focus on more practical matters.

Participants Need Practical Advice

We learned that pre-retirees wished they could go back in time and talk to their younger selves about planning ahead. When we asked about areas where they should have done better, saving rose to the top of the list:

  • Saving early (98%)
  • Contributing enough to get the company match (97%)
  • Contributing more (95%)


Pre-Retireees Rate the Importance of Savings Behaviors

As I mentioned in a previous post, group has strong regrets about not saving early and not saving enough. So, it makes sense that their advice centered on saving rather than on investing topics such as choosing funds and rebalancing.

Grade Inflation

We asked survey participants to grade themselves on saving and investing behaviors. Though they have regrets, they gave themselves a passing grade on saving for the future with an average grade of C+. Perhaps a more realistic group, approximately 20% of participants, gave themselves a D or F.

Surprisingly, the grades were higher on the investing side. About half of pre-retirees conceded that they didn’t really know what they were doing, but on average gave themselves a B- nevertheless. Only 10% gave themselves a D or F.

Takeaways for Plan Sponsors

Your defined contribution plan represents a major commitment to helping employees save and invest for the future. Based on our survey results, here are important considerations that may help get the most out of your efforts:

  • Keep it real. Most participants know they aren’t on track to retire to a tropical island. Make images and messages relevant to them.
  • Encourage saving. Start early and keep driving the message home. Give them ideas for finding money to sock away for the future.
  • Make the grade. Participants are probably giving themselves better grades than they deserve for saving. Help them understand how much they really need to save so they can get on track.


The opinions expressed are those of Diane Gallagher and are no guarantee of the future performance of any American Century Investments® portfolio. This information is not intended to serve as investment advice; it is for educational purposes only.