Workers Bank on 401(k) for Retirement but Need Help Making the Most of It, Says New Schwab Survey

Majority in Survey Say 401(k) Investments Harder to Understand Than Health Care Benefits

Thursday, August 15, 2013 5:30 am PDT

Dateline:

SAN FRANCISCO

Public Company Information:

NYSE:
SCHW
"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."

SAN FRANCISCO--(BUSINESS WIRE)--The majority of American workers in a new survey 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.

The nationwide survey of more than 1,000 401(k) plan participants, commissioned by Schwab Retirement Plan Services (“Schwab”), shows a high level of self-reliance among respondents. Roughly nine in ten (89%) say they are counting on themselves for the money to support their retirement, and just five percent expect to rely mostly on the government for financial help after they stop working full time.

This self-reliance is fueled by anticipated use of 401(k) plans. A large majority of survey respondents (61%) report the 401(k) is their only or largest source of retirement savings. More than half of respondents (55%) have increased their savings rate in the last two years and most (70%) say their 401(k) is in better shape now than ever before.

“It’s gratifying to see so many people taking the reins of their retirement,” said Steve Anderson, head of Schwab Retirement Plan Services. “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.”

Still, many are unsure how to invest…

Interestingly, the survey reveals that saving in a 401(k) is not enough to ensure confidence for many participants. For example:

  • More than half (52%) find explanations of their 401(k) investments more confusing than explanations of their health care benefits (48%).
  • Fifty-seven percent wish there was an easier way to figure out how to choose the right 401(k) investments.
  • Nearly half (46%) don’t feel they know what their best investment options are and one-third (34%) feel a lot of stress over correctly allocating their 401(k) dollars.

…And they want help

Today, many 401(k) plans offer some type of professional advice, which can be vital in helping people take better control of their investments. Of those surveyed, 61 percent want personalized investment advice for their 401(k). Participants expressed a desire for guidance on everything from asset allocation to risk tolerance and retirement income planning.

Most importantly, the survey found that investment confidence nearly doubles when workers have the help of a financial professional. Approximately one-third (32%) of survey participants expressed confidence in making the right 401(k) investment choices based on their own ability, compared to 61 percent if they also had the help of a financial professional.

“Getting more workers engaged in professional 401(k) advice should be a top priority for employers. We’ve 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 noted.*

Additional findings

Other findings show respondents are engaged and place a priority on their 401(k):

  • Save it, don’t spend it: Given a choice about how to use a $5,000 bonus, nearly two-thirds (64%) would save it in their 401(k) rather than take the cash now. Forty-eight percent immediately chose the 401(k) route and an additional 16% chose the 401(k) after tax consequences were explained.
  • Post-crisis recovery: Seventy-four percent of respondents said their 401(k)s have recovered from the financial crisis about as fast or even faster than expected.
  • Check the index: Nearly three-quarters (74%) would rather pay low investment fees for index funds than pay higher fees for actively managed funds that could potentially outperform the market, but may also carry greater risk.

About the Survey

This online survey of U.S. 401(k) participants was conducted by Koski Research for Schwab Retirement Plan Services, Inc. The survey is based on 1004 interviews and has a three percent margin of error at the 95% confidence level. Survey respondents worked for companies with at least 25 employees, were current contributors to their 401(k) plans and were 25-75 years old. Survey respondents were not asked to indicate whether they had accounts with Charles Schwab. All data is self-reported by study participants and is not verified or validated. Respondents participated in the study between June 5 and June 11, 2013. Detailed findings can be found at www.aboutschwab.com/press/research.

About Charles Schwab

At Charles Schwab we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity.

More information is available at www.aboutschwab.com. Follow us on Twitter, Facebook, YouTube, LinkedIn and our Schwab Talk blog.

Through its operating subsidiaries, The Charles Schwab Corporation (NYSE: SCHW) provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; compliance and trade monitoring solutions; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at www.schwab.com and www.aboutschwab.com.

Schwab Retirement Plan Services, Inc., Schwab Retirement Plan Services Company, and Charles Schwab & Co., Inc. are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation. Brokerage products and services are offered by Charles Schwab & Co., Inc. (Member SIPC). Schwab Retirement Plan Services, Inc. and Schwab Retirement Plan Services Company (collectively, Schwab Retirement Plan Services) provide recordkeeping and related services with respect to retirement plans. 0813-5544

*Charles Schwab in conjunction with Koski Research, The New Rules of Engagement for 401(k) Plans, 2010. Retirement plan investment advice is formulated and provided by GuidedChoice Asset Management, Inc. (GuidedChoice®), which is not affiliated with or an agent of Charles Schwab & Co., Inc. (CS&Co.), Schwab Retirement Plan Services, Inc. (SRPS), or any of their affiliates.

Multimedia Files:

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Steve Anderson, Executive Vice President of Schwab Retirement Plan Services (Photo: Business Wire)
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NEW SURVEY: WORKERS AND THEIR 401(K)s (Infographic provided by Schwab)
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Contact:

Charles Schwab
Mike Peterson, 330-908-4334
mike.peterson@schwab.com
or
Intermarket Communications
Neil Shapiro, 212-754-5423
nshapiro@intermarket.com

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