401(k) Participants Welcome Investment Advice

New research shows that while Americans are optimistic about their quality of life in retirement, they wish they had better managed their past spending, specifically to save more for retirement.

Schwab Retirement Plan Services’ nationwide survey of 1,000 401(k) plan participants finds that 70% of respondents believe their quality of life in retirement will be better than that of both their parents and their children. Saving for retirement, however, is still their top source of financial stress (40%).

In fact, two-thirds of participants (64%) wish they had spent less in the past in order to save more for retirement, particularly on restaurants, expensive clothing, new cars and vacations. Conversely, participants were found to be less likely to regret past spending on more enduring items, such as housing, weddings, student loans and tuition for their children.

Workplace Reliance

When asked what resource they expect will be their largest source of income in retirement, 62% said they expect to rely most on their 401(k) — topping “savings and investments outside my 401(k)” at 21%, Social Security at 10% and pensions at 6%.

In addition, survey respondents recognize the role of a 401(k) in helping them achieve a comfortable retirement, with 88% saying that a 401(k) is a “must-have” benefit and 90% saying they would “think twice” before accepting a job that didn’t offer one.

Many participants are also taking proactive steps to try to meet their retirement goals, as 65% reported that they increased their 401(k) contribution level in the past two years. And while most participants (72%) say they feel on top of their 401(k) investments, many still think they would benefit from professional help.

Professional Help

In fact, the findings show that participants are much more confident in their ability to make the right 401(k) investment decisions with help from a professional. When asked about their confidence level, there was a 27-point difference in responses between those who are either “extremely or very confident” in their own ability (50%), compared to 77% who cite that level if they have the help of a financial professional.

Yet there is a gap between what they say they desire and what they feel they deserve. While 71% of respondents would like personalized investment advice specific to their 401(k), slightly more than half (53%) believe their current financial situation actually warrants professional help. And while most (73%) think they know what percentage of their salary they should save in a 401(k), just over half (54%) say they know how much money they actually need to accumulate for a comfortable retirement.

Respondents also named the areas of retirement planning with which they would most like assistance:

  • Calculating how much money to save for retirement (43%)
  • Receiving specific advice on how to invest their 401(k) (39%)
  • Determining at what age they can afford to retire (39%)
  • Figuring out what their expenses will be in retirement (36%)

Financial Wellness

Survey participants are also staying on top of their finances, with a solid majority (72%) saying that they have some money left at the end of the month after they’ve paid their bills. But the findings also reveal that respondents may be missing out on opportunities to grow their assets: only one-fifth either put that extra money toward their 401(k) or invest it in the market (19% and 21%, respectively).

According to the authors, the findings indicate an opportunity for employers to implement a workplace financial wellness program. Participants would be highly likely to take advantage of resources at work, including online tools to help plan for retirement (88%) and help from a financial professional to develop a financial plan (77%), the results show.

“Employers should consider how these value-added programs can strengthen their workplace benefits offering,” notes Steve Anderson, president, Schwab Retirement Plan Services. “Financial wellness programs are a true win-win: not only can they help to alleviate the stress employees feel about retiring with enough savings, but they can also increase employee engagement and foster loyalty.”

The online survey conducted by Logica Research is based on 1,000 interviews between May 3-16, 2018, with U.S. 401(k) participants who worked for companies with at least 25 employees, were current contributors to their 401(k) plans and were 25-70 years old.

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