You never know what you can learn if you assume you don’t have all the answers and decide to just listen instead. One of the ways we try to take this idea to heart at BlackRock is through surveys, including our annual Retirement Survey and the Investor Pulse Survey, which is being released today.
Interpreting surveys, however, is a bit of an art form. You need to put yourself in the mindset of the people you’re listening to in order to understand what they are telling you. Take, for example, the following:
- 60% of the investors polled say they are concerned about having enough income from their investments to live comfortably in retirement, and 54% say they are worried about outliving their savings.
- Yet, 73% say they are confident that their long-term investment strategy will allow them to reach their goals.
Which is it? Concerned, worried or confident? Is there a contradiction here? How can people be confident in their strategy and worried at the same time?
Maybe it isn’t a contradiction. Maybe it’s that the transition they are supposed to make at retirement is unclear and uncertain. There is a gap in most investors’ understanding of how to move from one phase of their life (saving) into the next phase (spending).They need to translate their savings into some amount of income, and that is very difficult to do. Compounding the problem is that it seemingly requires that we do the nearly impossible, which is to estimate our life expectancy with some degree of accuracy.
Put in those terms, the supposed contradiction between confidence and concern is common sense. In fact, this mirrors the state of the defined contribution industry. We have developed a pretty good understanding of how to help participants accumulate a nest egg. We are only now beginning to grapple with how to help them spend their savings over a lifetime. (Or, in industry jargon, “deccumulation.”) That is something we will be talking about a great deal in the months to come.
In the meantime, some fresh thinking is required to address concerns of investors seeking to generate income from their savings in today’s environment of low yields. It may be time to expand beyond traditional fixed income strategies and to look at income-producing equities as part of your asset allocation. Whatever the solutions are, there is one thing that is clear: There are no answers that don’t begin with us listening to you to understand the questions.
Chip Castille, Managing Director, is head of BlackRock’s US & Canada Defined Contribution Group. You can find more of his posts here.