Meals Out, Pricey Clothes & New Cars Top Spending Regrets for Americans Trying to Save for Retirement, Schwab 401(k) Survey Finds

Monday, August 27, 2018 6:00 am PDT

Dateline:

SAN FRANCISCO

Public Company Information:

NYSE:
SCHW
"Employers have the opportunity to help their workers by offering financial wellness programs that provide guidance on some of the harder questions individuals face as they manage their day-to-day finances while saving for retirement. Unfortunately, only about half of the people we surveyed have access to this type of program"

SAN FRANCISCO--(BUSINESS WIRE)--New research from Schwab Retirement Plan Services, Inc. reveals that, despite having a positive outlook for retirement, American workers regret past spending and are concerned about being able to ultimately save enough for their golden years. The nationwide survey of 1,000 401(k) plan participants finds that while 70 percent believe their quality of life in retirement will be better than that of both their parents and their children, saving for retirement is still their number one source of financial stress (40%).

Paying for unexpected expenses (40%), being unwilling to sacrifice things that improve their quality of life (34%) and paying down credit card debt (31%) top the list of obstacles participants face when trying to save for retirement in the present. Moreover, two-thirds of participants (64%) wish they had spent less in the past to save more for retirement, particularly on meals out, expensive clothing, new cars and vacations. Conversely, participants are less likely to regret past spending on more enduring and significant items such as housing, weddings, student loans and tuition for their children.

According to the survey, respondents are relying heavily on their workplace retirement plans to help them meet their long-term goals, with 62 percent saying they expect their 401(k) to be their largest source of retirement income. Outside of a 401(k), however, participants may be missing out on opportunities to grow their nest eggs. The survey finds that, beyond their 401(k), participants are more likely to use a savings account to prepare for retirement than they are an IRA or other investment vehicle.

“The survey shows that if given the chance, many Americans would have spent differently on short-term pleasures, especially compared to spending that supports their families’ long-term happiness and success,” said Steve Anderson, president, Schwab Retirement Plan Services, Inc. “Moreover, participants understand the value of their 401(k)s and the importance of saving for retirement, but the findings suggest that they need guidance to prioritize their financial obligations and make the most of their assets. While there may be hurdles along the way, having a written financial plan can help workers make decisions today with an eye towards the future.”

A Little Help Goes a Long Way

As they plan for the years ahead, respondents recognize the role of a 401(k) in helping them achieve a comfortable retirement, with 88 percent saying a 401(k) is a “must-have” benefit and 90 percent saying they would think twice before accepting a job that didn’t offer one. The survey also reveals that many participants are taking proactive steps to try to meet their retirement goals, as 65 percent have increased their 401(k) contribution level in the past two years, and 80 percent believe their 401(k) is in better shape today than ever before.

Though most participants (72%) say they feel on top of their 401(k) investments, many still think they would benefit from professional help. According to the survey:

  • Half (50%) of respondents are extremely/very confident in their ability to make the right 401(k) investment decisions on their own, but;
  • 77 percent would feel that level of confidence if they had the help of a financial professional; and
  • 52 percent would expect better investment performance with professional advice.

Participants clearly recognize the value of advice, but there is a gap between what they say they desire and what they feel they deserve. While the majority (71%) would like personalized investment advice specific to their 401(k), only about half (53%) believe that 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.

“401(k) savers definitely have the right idea but could use help with the particulars,” added Catherine Golladay, senior vice president, 401(k) Participant Services and Administration at Schwab Retirement Plan Services. “The good news is that many 401(k) plans today offer investment advice, and that advice isn’t meant just for the affluent. It’s meant for everyone. No matter how much money you have to save and invest, a professional can help you maximize its potential.”

Workplace Financial Wellness for the Present and Future

The 401(k) participants surveyed are, by and large, staying on top of their finances, with most (72%) reporting that they have some money left at the end of the month after they’ve paid their bills. But respondents may be missing out on opportunities to grow their assets: only one-fifth either put that extra money towards their 401(k) or invest it in the markets (19% and 21%, respectively).

Participating in a workplace financial wellness program can help employees understand how to put their money to work for them, ultimately helping to alleviate financial stress. According to the survey, 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%).

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%).

“Employers have the opportunity to help their workers by offering financial wellness programs that provide guidance on some of the harder questions individuals face as they manage their day-to-day finances while saving for retirement. Unfortunately, only about half of the people we surveyed have access to this type of program,” Anderson stated. “Employers should consider how these value-added programs can strengthen their workplace benefits offering. 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.”

About the Survey

This online survey of U.S. 401(k) participants was conducted by Logica Research (formerly Koski Research) for Schwab Retirement Plan Services, Inc. Logica Research is neither affiliated with, nor employed by, Schwab Retirement Plan Services, Inc. The survey is based on 1,000 interviews and has a 3 percent margin of error at the 95 percent confidence level. Survey respondents worked for companies with at least 25 employees, were current contributors to their 401(k) plans and were 25-70 years old. Survey respondents were not asked to indicate whether they had 401(k) accounts with Schwab Retirement Plan Services, Inc. All data is self-reported by study participants and is not verified or validated. Respondents participated in the study between May 3 and May 16, 2018.

Detailed results can be found here.

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 and LinkedIn.

Financial tools and resources are available at www.schwabmoneywise.com.

Disclosures

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.

The Charles Schwab Corporation provides services to retirement and other benefit plans and participants through its separate but affiliated companies and subsidiaries: Charles Schwab Bank; Charles Schwab & Co., Inc.; and Schwab Retirement Plan Services, Inc. Trust, custody, and deposit products and services are available through Charles Schwab Bank. Schwab Retirement Plan Services, Inc. is not a fiduciary to retirement plans or participants and only provides recordkeeping and related services. (0818-8BHW)

Schwab MoneyWise® is provided by Charles Schwab & Co., Inc.

©2018 Schwab Retirement Plan Services, Inc. All rights reserved.

Contact:

Charles Schwab
Mike Peterson, 330-908-4334
mike.peterson@schwab.com
or
Intermarket Communications
Alex Sotiropoulos, 212-754-5615
asotiropoulos@intermarket.com

Multimedia Files:

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Top 5 spending regrets (Schwab 2018 401(k) Participant Survey) (Graphic: Business Wire)
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Obstacles 401(k) participants face when trying to save for retirement (Schwab 2018 401(k) Participant Survey) (Graphic: Business Wire)
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Investment help would boost 401(k) Participant Confidence (Schwab 2018 401(k) Participant Survey) (Graphic: Business Wire)
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Steve Anderson, president, Schwab Retirement Plan Services, Inc. (Photo: Business Wire)
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Catherine Golladay, senior vice president, 401(k) Participant Services and Administration at Schwab Retirement Plan Services (Photo: Business Wire)
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