Participants in 401(k) retirement plans who work with financial advisors save more and have clearer financial goals than their peers, according to a study by Natixis Global Asset Management.
On average, workers contribute 8.6% of pay to their 401(k)s, but those who work with advisors contribute 9.5%, while those without advisors contribute just 7.8%. Similarly, while nearly three-quarters (74%) of those who work with advisors say they know what their 401(k) balance should be by the time they retire, only about half (54%) of workers without advisors say the same. The survey found that 71% have spoken to their advisor about the level of contributions adequate for meeting their retirement goals.
Advisors also appear to be having an impact in education; nearly half (49%) of those without an advisor say their employer’s materials are difficult to understand, compared with 37% of those who do use advisors. One third indicated they didn’t know where their money is being invested.
Significantly, 48% said that if they understood their plans better, they would consider increasing their contributions.
Preparation Gaps
Workers may say they have a target, but the survey of 1,000 workers, 899 of which were enrolled in 401(k) plans, also showed some preparation gaps.
While 90% of those eligible to participate in 401(k)s are making contributions, the survey found that a third of Boomers have put aside less than $50,000, while 41% of participants in the Millennial or Generation Y group (those from ages 18 to 33) already have put aside $50,000. Boomers had saved an average of $262,541, about a third of the $805,398 they predict they’ll need at retirement.
Some younger investors had higher goals; members of Generation X (ages 34 to 49) have saved $206,866 toward their goal of just over $1 million. Millennials already average $91,215 in their plans, though they think they’ll need $822,000 for retirement.
While retirement income calculators are a common planning feature, just 38% of participants have used them. Just over half (51%) say their employers offer personalized performance benchmarks, such as displaying a rate of progress toward a retirement savings goal, but fewer than a quarter (23%) have used those.
Natixis’ 401(k) plan research was conducted online in May 2014 with 899 active 401(k) plan participants in the United States. Of the active participants, the age groups are broken up as follows: 249 Gen Y (18-33 years old), 335 Gen X (34-49 years old), 308 Baby Boomers (50-67 years old). There were 427 advised participants and 472 of non-advised participants. The minimum income level required for survey respondents was $15,000.
