MassMutual Asian American Retirement Risk Study...On average, Asian American retirees plan to spend...

MassMutual Asian American Retirement Risk Study

M A Y 2 0 1 8

2

Background & Methodology

Background • To better understand the investment preferences and philosophies of those 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 that included 804 pre-retirees and 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 Asian Americans.

Between the main sample and oversample we collected 199 interviews from Asian Americans, including 129

pre-retirees and 70 retirees.

Please note that Asian American is defined in this research as Chinese, Asian Indian and Korean.

3

Asian American Key Findings

Asian Americans are more vigilant investors compared to Americans overall.

• Making a poor investment decision (67% vs. 54%) and taking on too much risk (69% vs. 44%) are more

concerning to Asian Americans. Asian American pre-retirees (75%) are especially concerned about taking

on too much investment risk.

• Their cautiousness translates to their retirement investment approach and market expectations. Asian

Americans are more likely than Americans overall to believe workers approaching retirement should cut

back on investing in equities (64% vs. 53%). They are more likely to aim for their assets to match the market

(43% vs. 32%), while Americans overall are more inclined to want their assets to outperform the market(65%

vs. 55%).

• Asian Americans are less likely to have committed a “bad plan behavior.” One in four Americans overall

(25%) have withdrawn money from their retirement account, taken out a hardship loan, or suspended

contributions; only one in ten Asian Americans say the same (11%).

• Despite Asian Americans’ expressed opinions about cautious investing, there is no significant difference

between Asian Americans and Americans overall in regard to their overall risk tolerance and their current

investment mix.

Asian Americans have a stronger preference to be heavily involved in managing their finances

and investments.

• Asian Americans are less likely to work with an advisor. A little over one in three Americans overall are not

currently working with an advisor (35%) compared to nearly 7 in 10 Asian Americans (69%).

• There is a very strong desire among Asian American retirees in particular to be in control of their finances.

Compared to general population retirees, Asian American retirees are more likely to enjoy managing their

own money (80% vs. 59%). When looking only at Asian Americans, only two in five retirees (42%) prefer an

investment that allows them “set-it-and-for-get-it” compared to nearly three in four pre-retirees (72%).

• Target Date Funds are a little less appealing to Asian Americans as one in ten (11%) find them very appealing

compared to one in six Americans overall (17%).

4

Asian American Key Findings

There is room for financial education and improved marketing efforts to Asian Americans.

• Fewer Asian Americans are confident projecting how many years they will spend in retirement and

therefore are not planning to meet those needs. Over half of Asian Americans (53%) are uncertain

about the length of their retirement compared to a little over one-third of Americans overall (36%).

• Moreover, fewer Asian American retirees (63%) are confident they know how to claim Social

Security at the right time to maximize its benefits, than American retirees overall (75%).

• These data suggest that workplace retirement plans are less satisfactory to Asian Americans.

Though total plan satisfaction rates are comparable between Asian Americans and Americans

overall, Asian Americans are less likely to be very satisfied with several aspects of their retirement

plans including the performance of investments in that plan (36% vs. 19%), options available at

retirement (34% vs. 17%), and education and advice available through the plan (29% vs. 14%).

5

Health care costs and being in poor health are the top retirement concerns for Asian Americans.

26%

22%

18%

15%

13%

4%

2%

33%

17%

13%

14%

18%

2%

2%

Health and long-term care costs

Not having enough money to enjoy yourself

Running out of money

Losing the ability to be active

Being in poor health

Feeling less useful

Losing touch with family and friends

General population Asian Americans

What is your greatest worry about your retirement years? (General population n=1,605; Asian Americans n=199)

Greatest Worry About Retirement Years

6

Asian Americans are more confident than Americans overall they will have enough money to meet their retirement lifestyle goals.

• Fewer Asian American retirees (63%) feel they know how to claim Social Security at the right time compared to

retirees overall (75%).

• Nearly all Asian American retirees (96%) are confident their retirement income will last their lifetime; fewer than

two in three Asian American pre-retirees (63%) say the same.

• Asian American pre-retirees are more likely than pre-retirees overall to indicate they are not worried about

financing their retirement (51% vs. 37%).

To what extent do you agree or disagree with each of the following statements? (General population n=1,605; Asian Americans n=199)

Agree/Disagree

21%

13%

13%

14%

14%

14%

10%

11%

47%

53%

52%

56%

48%

60%

36%

44%

24%

23%

28%

27%

29%

23%

39%

33%

7%

11%

7%

3%

9%

3%

15%

12%

General population

Asian Americans

General population

Asian Americans

General population

Asian Americans

General population

Asian Americans

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

My retirement income will last

as long as I live

I have enough money to meet

my retirement lifestyle goals

I am not worried about

financing my retirement

7

16%

27% 24%

26%

6%

1%

17%

25%

30%

14% 12%

1%

Less than 50% 50% to less thantwo-thirds (65%)

Two-thirds (66%) toless than 75%

75% to less than90%

90% to 100% More than100%/More income

than when youwere working

Total Asian Americans

Seven in ten Asian Americans (72%) believe they need a retirement income replacement rate of less than 75%.

• Asian American pre-retirees are more likely than pre-retirees overall to anticipate needing to replace 90% or

more of their pre-retirement income in retirement (17% vs. 7%).

[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? (General population n=1,605; Asian Americans n=199)

Pre-Retirement Income

8

Over half of Asian Americans are uncertain about the length of their retirement; one-third of Americans overall say the same.

•On average, Asian American retirees plan to spend a longer time in retirement than Asian American pre-retirees

(28 years vs. 21 years).

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? (General population n=1,605; Asian Americans n=199)

Expected Years of Living Comfortably in Retirement vs. Years in Retirement

General Population Asian Americans

3%

14%

23%

15%

5%

3%

37%

2%

18%

28%

13%

2%

<0.5%

36%

Less than 10

10-19

20-29

30-39

40-49

50 or more

Not sure/No way of knowing

Years savings will last Years in retirement

6%

12%

16%

14%

6%

3%

43%

2%

18%

17%

9%

2%

0%

53%

Less than 10

10-19

20-29

30-39

40-49

50 or more

Not sure/No way of knowing

Years savings will last Years in retirement

Median Years in

Retirement General population 24 Asian Americans 21

Median Years Savings

Will Last General population 25 Asian Americans 20

Income Gap

General population 1 Asian Americans -1

9

Concern about making a poor investment decision and taking on too much risk is higher among Asian Americans compared to Americans overall.

• Asian American pre-retirees have higher concern about taking on too much investment risk, as three in four

(75%) are at least somewhat concerned compared to a little less than half of pre-retirees overall (49%) and

Asian American retirees (46%).

• Compared to Asian American retirees, pre-retirees are more likely to be at least somewhat concerned about

falling short on income in retirement (77% vs. 48%) and low interest rates (72% vs. 31%).

How concerned are you about each of the following [IF PRE-RETIREE: in retirement]? (General population n=1,605; Asian Americans n=199) *Asked of pre-retirees only

Level of Concern

38%

44%

30%

31%

21%

19%

19%

37%

14%

16%

43%

40%

47%

49%

51%

58%

35%

30%

31%

53%

16%

12%

19%

15%

23%

17%

37%

27%

45%

26%

3%

3%

4%

5%

5%

6%

9%

6%

10%

5%

General population (n=804)

Asian Americans (n=129)

General population

Asian Americans

General population

Asian Americans

General population

Asian Americans

General population

Asian Americans

Very concerned Somewhat concerned Not too concerned Not at all concerned

Major losses in the value

of your investments right

before you retire*

A major downturn in the

stock market

Stock market volatility

Making a poor investment

decision that leads to

significant loss

Taking too much

investment risk

10

Seven in ten Asian Americans are comfortable taking at least some investment risk, similar to Americans overall.

Which statement comes closest to describing how comfortable you are when it comes to taking investment risk? (General population n=1,605; Asian

Americans n=199)

Investment Risk

8%

68%

21%

3%

12%

58%

28%

2%

I am comfortable taking a high level of investment risk, inorder to have the possibility of high investment returns

I am comfortable with some investment risk, in order tohave the possibility of above average investment returns

I am only comfortable with a little investment risk, eventhough I know I have to accept below average

investment returns

I cannot accept any investment risk, and I am willing toaccept very low investment returns


11

Roughly four in five Asian Americans say their current investment mix is tilted towards moderate growth or is balanced.

How would you describe the investment mix you currently have? (General population n=1,605; Asian Americans n=199)

Current Investment Risk

10%

42%

37%

7%

2%

2%

8%

42%

40%

8%

1%

<0.5%

Aggressive growth

Moderate growth

Balance between growth and preserving yourmoney

Preservation with some growth

Completely focused on preservation

Not sure


12

Asian Americans are more likely than Americans overall to be aiming for their investments to match the market.

When it comes to your investments, do you aim for them to...? (General population n=1,605; Asian Americans n=199)

Aim for Investments

13%

52%

32%

3% 1%

13%

42% 43%

2% <0.5%

Significantly outperform

the market

Slightly outperform the

market

Match the market Slightly underperform

the market

Significantly

underperform the

market


NET: Outperform the Market

General population-65%

Asian Americans-58%

13

59%

41%

40%

34%

9%

8%

38%

54%

54%

62%

45%

56%

3%

5%

6%

4%

38%

28%

8%

7%

General population

Asian Americans

General population

Asian Americans

General population

Asian Americans


Nearly all want their investments to continue to grow, but Asian Americans are more likely to suggest workers invest less in equities as retirement approaches.


Agree/Disagree

I want my investments to

continue to grow even

after I retire

It is important to take steps

to ensure you do not suffer

major stock market losses

right before you retire

As workers approach

retirement, they should

significantly cut back how

much they invest in stocks

and stock mutual funds

14

Asian Americans are less likely to strongly believe they should become significantly more conservative in retirement.

Which of the following comes closest to how you approach retirement investing? (General population n=1,605; Asian Americans n=199)

Preferred Approach to Retirement Investing

• Americans overall are a little more likely than Asian Americans to prefer “Theory A”.

16%

26% 28% 27%

4%

12%

20%

35%

27%

6%

Completely followTheory A

Follow in Theory Amore than Theory B

Follow in bothequally

Follow Theory B morethan Theory A

Completely followTheory B

General population

Asian Americans

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

General population – 41%

Asian Americans – 32%

Net: Theory B

General population – 31%

Asian Americans – 33%

15

• Among those who are not working with an advisor, an equal proportion of Americans overall (31%) and Asian

Americans (32%) do not plan to do so in the future.

• Interestingly, unlike the general population, Asian pre-retirees and Asian retirees are advised at similar levels.

However, among Asian Americans, the interest in working with a financial advisor is driven entirely by Asian pre-

retirees as 99% of Asian retirees not working with an advisor do not plan to work with one.

Asian Americans are less likely than Americans overall to work with an advisor.

How many professional financial advisors do you currently work with that advise on investments? (General population n=1,605; Asian Americans n=199) [IF NO ADVISOR] Do you plan to work with a professional financial advisor in the future? (General population n=496; Asian Americans n=116)

Number of Advisors Plan to Work With Advisor in Future

56%

7%

2%

35%

26%

6%

0%

69%

One

Two

More than two

None

General population

Asian Americans

Yes

31%

No

69%

General Population

Yes

32%

No

68%

Asian Americans

16

• Compared to Asian Americans, advised Americans overall are more likely to have been advised to invest more

aggressively.

More than half of Asian Americans with advisors have been advised to change their investments as retirement approaches. Advisors suggest being more conservative.

[IF HAS ADVISOR] Has/Did your advisor recommended/recommend changing/that you change your investment mix as you approached retirement? (General population n=1,109; Asian Americans n=83)

[IF YES] What did your advisor recommend when it came to the mix of your investments? (General population n=616; Asian Americans n=48)

*Small base size, please use caution

Advisor Recommended Changing Investment Mix

While Approaching Retirement

Recommended Changes to

Investment Mix

Yes

49% No

51%

General Population

Yes

56%

No

44%

Asian Americans

10%

68%

20%

2%

11%

75%

10%

4%

That you invest moreconservatively

That you invest somewhatmore conservatively

That you invest somewhatmore aggressively

That you invest moreaggressively

General population Asian Americans*

17

• Asian American pre-retirees are more likely than Asian American retirees to prefer an investment option that

doesn’t require active management (72% vs. 42%).

• Asian American retirees are more likely than American retirees overall to enjoy managing their own money (80%

vs. 59%).

Asian Americans are more likely to enjoy figuring out how to invest, while Americans overall are more likely to prefer to delegate financial decisions.


Agree/Disagree

15%

9%

14%

15%

17%

6%

54%

56%

44%

53%

36%

39%

26%

30%

33%

24%

32%

38%

5%

5%

9%

7%

16%

17%

General population

Asian Americans

General population

Asian Americans

General population

Asian Americans


I would prefer an

investment option that lets

me “set-it-and-forget-it”

I enjoy figuring out how to

best invest my money

I prefer to delegate

financial decisions to a

professional, rather than

do it myself

18

• Compared to retirees overall, Asian American retirees find actively managed mutual funds (71% vs. 44%),

customized investments (64% vs. 40%), and target dates funds (47% vs. 29%) less appealing.

• Asian American pre-retirees find customized investments (69% vs. 40%) and target date funds (68% vs. 29%) more

appealing than Asian American retirees.

Six in ten Asian Americans find TDFs appealing. They find actively managed mutual funds and customized investments less appealing than Americans overall.

How appealing do you find each of the following investment types? (General population n=1,605; Asian Americans n=199)

Appealing Types of Investments

24%

16%

21%

20%

19%

9%

17%

11%

53%

49%

55%

60%

52%

53%

47%

48%

78%

65%

77%

79%

71%

63%

64%

60%

General population

Asian Americans

General population

Asian Americans

General population

Asian Americans

General population

Asian Americans

Very appealing Somewhat appealing

Actively managed mutual funds

Passively managed mutual funds

Customized investments where the

money manager automatically

customizes the allocation

Target date funds (TDFs)

19

Asian Americans are less likely to be very satisfied with their retirement plan overall.

How satisfied are/At the time of your retirement, how satisfied were you with the following aspects of your employer’s retirement plan? (General population n=1,605; Asian Americans n=199)

42%

26% 36%

19%

41%

19%

34%

17%

29%

14%

51%

66% 56%

75%

51%

72% 52%

71% 50%

68%

93% 92% 92% 95% 91% 91% 86% 88%

79% 82%

General

population

Asian

Americans

General

population

Asian

Americans

General

population

Asian

Americans

General

population

Asian

Americans

General

population

Asian

Americans

Very satisfied Somewhat satisfied

The plan overall

The performance of

the investments in the plan

The investment

choices available to you

The options available

for what to do with your savings at

retirement

The education and

advice available through the plan

Satisfaction with Plan Aspects

20

• Asian American retirees are less familiar with actively managed mutual funds (67%) than retirees overall (82%)

and Asian American pre-retirees (77%).

Asian Americans report the same level of familiarity with different types of investments as Americans overall.

How familiar are you with each of the following investment types? (General population n=1,605; Asian Americans n=199)

Familiarity with Different Types of Investments

28%

24%

25%

23%

22%

21%

18%

12%

48%

50%

46%

47%

35%

38%

43%

41%

18%

21%

22%

25%

28%

32%

29%

34%

5%

4%

7%

6%

14%

9%

10%

14%

General population

Asian Americans

General population

Asian Americans

General population

Asian Americans

General population

Asian Americans

Very familiar Somewhat familiar Not too familiar Not at all familiar




Customized investments where the

money manager automatically

customizes the allocation

21

Only one in four Americans overall and Asian Americans are invested in a TDF.

[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? (General population n=1,605; Asian Americans n=199)

Investments in Different Funds

47%

43%

26%

25%

44%

50%

24%

24%




Customized investments where the moneymanager automatically customizes the allocation


22

Asian Americans are more likely to say they don’t like TDFs because they would rather manage the money themselves.

[IF FAMILIAR WITH TDFs] To what extent do you agree or disagree with each of the following statements regarding Target Date Funds (TDFs)? (General population n=1,378; Asian Americans n=183)

Target Date Funds (TDFs) – Agree/Disagree

• This sentiment is particularly strong among retired Asian Americans, of whom seven in ten (71%) prefer to

manage their money themselves.

22%

13%

13%

7%

13%

9%

11%

11%

6%

5%

5%

7%

4%

3%

41%

54%

47%

42%

25%

33%

29%

44%

19%

22%

37%

42%

19%

23%

13%

15%

24%

35%

22%

27%

44%

32%

38%

39%

24%

23%

30%

36%

24%

18%

16%

16%

40%

31%

16%

13%

38%

34%

34%

29%

47%

38%

General population

Asian Americans

General population

Asian Americans

General population

Asian Americans

General population

Asian Americans

General population

Asian Americans

General population

Asian Americans

General population

Asian Americans

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 time to adjust my investments myself

TDFs are a “default option” if

employees do not pick our own

investments

I don’t like TDFs because I would rather manage the money myself

My employer encourages employees to invest in TDFs

I wish TDFs were more personalized

Most of the people I know at work

are in TDFs

23

One in four Americans overall have participated in a “bad plan behavior.” Only one in ten Asian American pre-retirees and retirees say the same.

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. (General population n=1,605; Asian Americans n=199)

Have you ever…?

15% 10%

6%

75%

9% 4%

0%

89%

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


NET: “Bad Savings Behavior”

General population - 25%

Asian Americans - 11%

Study Demographics

25

Demographics

General Population (n=1,605)


Age

40-54 53% 76%

55-64 32 13

65-74 12 11

75+ 3 *

Gender

Male 48% 50%

Female 52 50

Employment Status

Employed full-time 73% 79%

Employed part-time 1 4

Not employed 25 17

Education

Some high school or less * --

High school graduate 9% 1%

Some college/trade or technical school 29 13

College graduate (4-year degree) 40 39

Graduate or professional degree 21 47 *=<0.5%

26

Demographics



Retired

Yes 27% 21%

No 73 79

[IF PRE-RETIREE] Within how many years do you expect to retire?

(n=804) (n=129)

5 years or less 20% 13%

6 to 10 years 31 44

11 to 15 years 49 43

[IF RETIREE] For how many years have you been retired?

(n=801) (n=70)

5 years or less 55% 67%

6 to 10 years 25 19

11 to 15 years 20 14

*=<0.5%

27

Demographics



2017 Household Income

Less than $30,000 * *

$30,000 to $39,999 1% *

$40,000 to $49,999 2 8%

$50,000 to $74,999 25 26

$75,000 to $99,999 20 12

$100,000 to $124,999 18 14

$125,000 to $149,999 12 10

$150,000 or more 23 30

Savings and Investments

Less than $50,000 9% 6%

$50,000 to $99,999 6 9

$100,000 to $149,999 7 9

$150,000 to $199,999 6 5

$200,000 to $249,999 8 12

$250,000 to $499,999 19 17

$500,000 to $999,999 21 16

$1 million or more 22 23

Prefer not to say 2 3 *=<0.5%

28

Demographics



Hispanic, Spanish, or Latino Descent

Yes 5% *

No 95 100%

Racial/Ethnic Background

White/Caucasian 89% --

African-American/Black 5 --

Asian/Indian/Pacific Islander 5 100%

Other * --

[If Asian] (n=55) (n=199)

Chinese 42% 66%

Indian 22 26

Japanese 16 --

Vietnamese 3 --

Korean -- 8

Other 17 --

*=<0.5%

29

Demographics



Sexual Orientation

Heterosexual or straight 93% 95%

Gay 3 1

Lesbian 1 --

Bisexual 1 1

Prefer not to say 2 3

Transgender or Transsexual

Yes * --

No 99% 99%

Prefer not to say 1 1

Marital Status

Married 75% 77%

Divorced or separated 10 7

Single, never married 9 9

Not married, but living with a partner 4 5

Widowed 2 1

*=<0.5%

30

Demographics



[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

34% 41%

You take the lead and discuss decisions with another household member

35 30

Decisions are made in total partnership 30 29

[IF MARRIED OR PARTNER] Spouse’s/Partner’s Employment Status

Employed full-time 61% 75%

Employed part-time 7 5

Not employed 32 19

[IF MARRIED OR PARTNER] Spouse/Partner Retired

Yes 36% 24%

No 64 76

*=<0.5%

31

Demographics



Do you currently own any of the following insurance or financial products? Please select all that apply.

Life insurance 69% 44%

A defined retirement plan or traditional pension plan 46% 41%

An annuity 24% 16%

Long-term care insurance 20% 11%

None of those 13% 31%

Until what age do you think that you can expect to live?

Before 70 1% 1%

70 to 79 5 7

80 to 85 27 23

86 to 89 4 2

90 to 95 24 10

96+ 3 4

Not sure/No way of knowing 36 53

Are you currently receiving Social Security retirement benefits?

Yes 18% 10%

No 81 90

Not sure * -- *=<0.5%

32

Demographics



At what age (do you think you will /did you) claim your Social Security retirement benefits?

Before 63 16% 17%

63 to 65 22 14

66 to 69 30 19

70+ 14 14

Not eligible 1 5

Not sure 16 31

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% 9%

Taken a hardship loan, like in a financial emergency 10% 4%

Suspended contributions (after a withdrawal or other reason) 6% --

None of these 75% 89%

*=<0.5%

33

Demographics



Nature of Occupation

Professional or technical 28% 52%

Mid-level or lower level Manager 22 15

Senior Manager 14 11

Administrative 12 7

Other white collar 8 2

Blue collar 7 6

Executive 5 6

Service worker 2 1

Sales or retail * 1

Medical or nurse * --

Customer service * --

Business owner * --

Teacher * --

Clerical * --

Something else 1 *

*=<0.5%

34

Demographics



Industry

Manufacturing/Production 18% 11%

Business and financial 15 18

Health care 10 8

Computer technology 7 22

Services industry 7 3

Engineering 4 6

Technology (other than computer) 4 5

Construction and maintenance 4 2

Legal 3 1

Agriculture 1 1

Arts and entertainment 1 1

Education 1 6

Life sciences 1 1

Physical sciences * 1

Social services * --

Architecture * --

Mathematical or statistical * --

Other 23 15 *=<0.5%

MassMutual Asian American Retirement Risk Study...On average, Asian American retirees plan to spend...

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