The majority of American workers accept responsibility for financing their own retirement and are relying primarily on their 401(k) to get them there, but many lack the confidence to effectively manage their retirement savings.
This according to a nationwide survey of more than 1,000 401(k) plan participants, commissioned by Schwab Retirement Plan Services. Respondent findings show a high level of self-reliance. Approximately nine in 10 (89%) say they will be responsible for coming up with the money to support themselves in retirement. Five percent indicated that their financial help will be provided by the government upon completion of their full time employment.
This self-reliance is fueled by the anticipated use of 401(k) plans.
61% report the 401(k) is their only or largest source of retirement savings
55% have increased their savings rate in the last two years
70% say their 401(k) is in better shape now than ever before
Its gratifying to see so many people taking the reins of their retirement, said Steve Anderson, head of Schwab Retirement Plan Services in a statement. In our view, contributing to a 401(k) plan should be the number one savings priority for workers. Planning ahead, taking action and getting the help you need along the way are key steps to help build sufficient retirement savings.
UNSURE HOW TO INVEST
The survey reveals that saving in a 401(k) is not enough to instill confidence for many participants.
52% find their 401(k) investment explanations even more confusing than that of their health care benefits (48%)
57% would like an easier way to figure out what 401(k) investments are right for them
46% dont feel they know what their best investment options are
34% feel a lot of stress over correctly allocating their 401(k) dollars
Many 401(k) plans offer some type of professional advice, which can be instrumental in helping people take better control of their investments. Of those surveyed, 61% want personalized investment advice for their 401(k). Participants requested the need for guidance on everything from asset allocation to risk tolerance and retirement income planning.
First and foremost, the survey showed that investment confidence nearly doubled when workers have the help of a financial professional. Approximately one-third (32%) of survey respondents expressed confidence in making the right 401(k) investment choices based on their own ability, compared to 61% if they also had the help of a financial expert.
Getting more workers engaged in professional 401(k) advice should be a top priority for employers. Weve seen the positive impact it can have on both behaviors and outcomes, said Anderson. At Schwab Retirement Plan Services, Inc., participants who used third-party, professional 401(k) advice tended to increase their savings rate, were better diversified and stayed the course in their investing decisions, he said in the same statement.