Facing both inflation and a possible recession, retirement investors are under a lot of financial stress in 2022. And they are looking at their retirement plan providers for both information and guidance. But the Michigan-based consumer research firm J.D. Power says that overall satisfaction with retirement plan providers is falling. And the study shows that one metric has become a battleground for retaining clients: digital performance. Let’s break down what J.D. Power says, which are the top-ranking providers and when you should stay with an old retirement account or move your money.
If you want to put a sustainable retirement plan together, a financial advisor could help you set and follow through on goals.
Why Digital Performance Is Breaking Retirement Plans
J.D. Power’s 2022 U.S. Retirement Plan Digital Experience Study says that with more than half (53%) of retirement plan investors classified as “financially unhealthy,” and just over six in 10 saying that “they have challenges managing their accounts digitally,” overall satisfaction has fallen by 12 points on a 1,000-point scale.
According to the 2022 study, the industry average is 663 points, while the average in 2021 was 675.
The study calls out “strong digital performance” as a key factor that is “highly correlated with retirement investor asset acquisition and retention.” But the consumer research firm also says that client dissatisfaction could be linked to another finding: only “37% of investors say they can manage their accounts digitally without contacting customer service.”
Among the strongest digital performers in the study, half of investors say that they “definitely will” keep assets with current providers if they change jobs. But this approval falls by almost two-thirds to 17% of investors at lower-performing firms.
J.D. Power says that client retention is becoming a top priority for retirement plan providers now that the average job tenure for Millennials and Gen Z is below three years. And following this argument, investing in digital account management can become an opportunity to retain clients as they move from job to job.
“When they get the digital experience right, they see a very significant lift in the likelihood to grow and retain participant assets long after they have left their current employer,” said Mike Foy, senior director and head of wealth intelligence at J.D. Power, in a press release.
One key finding that providers should keep in mind: The study shows that overall customer satisfaction went up by 191 points to 671 when participants “could complete tasks by themselves on their plan’s website or mobile app.”
How Does Your Retirement Plan Rank?
J.D. Power’s client satisfaction ranking is based on responses from just over 7,000 retirement plan participants, taken between May and June in 2022. Key factors used to measure digital experience include information and content, navigation, speed and visual appeal.
Here are the top 5 retirement plan providers for 2022:
- Bank of America (including Merrill)
- Charles Schwab
- Prudential Financial
- Fidelity Investments
- T. Rowe Price
Both Bank of America and Charles Schwab are tied for first at 704 points. Prudential Financial has 696 points, Fidelity Investments has 690 and T. Rowe Price has 689.
When compared with 2021, Charles Schwab claimed the top spot with 725 points, followed by Bank of America with 703, AIG Retirement Services with 699, T. Rowe Price with 698 and Fidelity Investments with 694.
Other providers rounding out the top 10 in 2022 include:
- Capital Group/American Funds, 679 points
- Ascensus, 677 points
- MissionSquare Retirement (formerly ICMA-RC), 672 points
- Nationwide, 672 points
- TIAA, 666 points
Should You Stay With Your Old Retirement Account?
Almost 48 million workers quit their jobs in 2021. And if you were one of these workers, or intend to change your job in the near future, deciding on whether to keep a retirement account or rolling it over into a new one is an important decision.
Generally, when you leave a workplace you have four options:
- Keep it where it is
- Roll it over to an individual retirement account (IRA)
- Roll it over to another retirement account with a new employer
- Cash it out
Workers who have saved more than $5,000 with a former employer often choose to keep their old retirement accounts, especially when these include company stock that they want to keep or valuable investments like stable value funds.
You should, however, re-evaluate and rebalance existing retirement accounts regularly as higher fees and poorly-allocated investments could add up to a $700,000 loss in a lifetime.
If you choose to roll your money over into an IRA, you could benefit from lower fees, wider investment options and avoid future concerns about having to change your retirement when you switch jobs.
On the other hand, if you choose to roll over your money to a new employer plan, you could benefit from having all of your retirement savings in one account. But note whether the terms of your new plan are more favorable than the old ones, and if you’re under age 59.5, make sure to execute the rollover correctly to avoid an early withdrawal penalty.
Finally, if you choose to cash out your old retirement plan, the IRS will treat the balance as taxable income. So if the balance is big enough, you may want to work with a financial advisor to optimize a tax strategy for your withdrawal.
Bottom Line
The 2022 J.D. Power study shows that retirement plan providers can retain more clients by investing in digital account management. If you are considering whether to stay with your old retirement plan or roll it over into a new one, make sure you consider the advantages and disadvantages for your retirement savings.
Tips for Retirement Planning
- A financial advisor can help you figure out which are the best options for your retirement plan. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- SmartAsset’s free Social Security calculator will help estimate how much you can get in retirement.
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