Schwab Research Finds Gap Between Employer and Employee Views on Retirement Preparedness Through 401(k) Plans

Monday, May 7, 2012 10:00 am PDT



Public Company Information:

"This data suggests that employers and their employees, while sharing a common goal of retirement preparedness, have different points of view on which engagement strategies are most effective in helping employees achieve that goal"

SAN FRANCISCO--(BUSINESS WIRE)--Employers and their employees hold different perspectives on how to best achieve retirement preparedness through 401(k) plans, according to the results of two newly released studies from Schwab Retirement Plan Services. Taken together, the studies indicate that, despite efforts by employers to educate workers on the 401(k) offering, most workers are unengaged and financially unprepared for retirement.

CFO Research Services, on behalf of Schwab, surveyed more than 200 senior finance and human resources executives from large and mid-sized U.S. companies about their perceptions of 401(k) plans in the workplace. Key findings include:

  • More than half (54%) of employers report that employees participating in plans are not taking full advantage of the investment options, features and services offered in connection with their 401(k) plan.
  • In order to better engage employees, the majority of employers plan to make as much or more extensive use of traditional outreach methods, including interactive planning tools (93%), printed educational materials (93%), and in-person workshops (81%).
  • Only 16 percent of employers plan to adopt or promote personalized savings and investment management through a third-party adviser, despite evidence outside this survey of its positive impact on employee savings and investing behavior1.
  • A growing number of employers are using or considering the use of automatic solutions. In total, 45 percent are currently auto-enrolling employees and another 25 percent are very or somewhat likely to do so.

A separate survey of 401(k) participants finds that relatively few have the desire to manage their own workplace savings plan. Koski Research, on behalf of Schwab, surveyed more than 1,000 workers enrolled in 401(k) plans across the country and found that:

  • More than half (52%) say they don’t have the time, interest or knowledge to properly manage their 401(k) portfolio.
  • Nearly three-quarters (73%) spend less than eight hours per year managing their 401(k) plan account.
  • Many (56%) do not review plan-related education materials they receive.
  • Nearly one-third don’t know they pay any fees for their 401(k) plan. Of the 70 percent that understand they pay some sort of fees, 95 percent don’t know about investment fund operating expenses, and 67 percent don’t know about plan administration fees.
  • A significant majority (83%) say they are interested in receiving professional investment management from their employer. However, this interest does not translate into action based on Schwab data that shows just one in 10 participants actually takes advantage of 401(k) investment management advice when it is offered2.

“This data suggests that employers and their employees, while sharing a common goal of retirement preparedness, have different points of view on which engagement strategies are most effective in helping employees achieve that goal,” said Dave Gray, vice president of 401(k) client experience at Charles Schwab.

Other noteworthy findings from the 401(k) participant survey include:

  • A majority of respondents (61%) have calculated the savings they believe they will need for retirement. Among this group, 84 percent were confident that their savings would last.
  • Respondents reported on average that they feel they need to bridge an eight-fold gap between how much they have saved and how much they calculated they would need in retirement.

”It is encouraging that many of the respondents took steps to estimate how much they need for retirement, but the eight-fold gap between their current savings and their stated goals may reveal a misplaced confidence in their ability to reach those goals. Employers have a unique opportunity to help their employees bridge that savings gap. An approach that integrates automatic enrollment features, including a built-in advice solution and annual savings increases, coupled with lowering costs for employees, may help them save more for retirement. An approach like this is a good step toward meeting the goals of both employers and employees, based on the concerns reported in these surveys,” concluded Gray.

About the Study “401(k) Participant Survey”

In August and September 2011, Koski Research conducted an online survey and gathered a total of 1,005 responses from a national representative sample of U.S. workers who were participating in their company’s 401(k) plan. Respondents were working for a company of 25+ employees representing a range of industries with the exception of schools, hospitals or government agencies. Respondents had a minimum of $5,000 in retirement savings and were between 18-65 years old.

About Koski Research

Koski Research is a marketing research firm that helps leading financial services firms use market research to improve decision-making and stimulate communication efforts. Koski Research has conducted thousands of surveys and interviews among executives, individual and institutional investors, and intermediaries that have enabled financial services firms to have a deeper understanding of their clients and better meet their needs.

About the Study “The Changing Benefits of 401(k)s”

In July and August 2011, CFO Research Services conducted an online survey and gathered responses from 215 senior finance and human resources executives at U.S. companies with annual revenues of $100 million or higher. Survey respondents represent companies from a wide range of industries. All respondents report that their companies offer a 401(k) plan.

About CFO Research Services

CFO Research Services is the sponsored research group within CFO Publishing LLC, which also produces CFO magazine,, and CFO Conferences.

About Charles Schwab

The Charles Schwab Corporation (NYSE:SCHW) is a leading provider of financial services, with more than 300 offices and 8.6 million active brokerage accounts, 1.52 million corporate retirement plan participants, 801,000 banking accounts, and $1.83 trillion in client assets as of March 31, 2012. Through its operating subsidiaries, the company 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,, 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; 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 mortgage services and products. More information is available at and (0412-2824)

Koski Research and CFO Research Services are not affiliated with The Charles Schwab Corporation or any of its subsidiaries.

Schwab Retirement Plan Services is comprised of Schwab Retirement Plan Services, Inc. and Schwab Retirement Plan Services Company. Schwab Retirement Plan Services, Inc., Schwab Retirement Plan Services Company, Charles Schwab Bank, 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). Trust and custody services are provided by Charles Schwab Bank.

1 Financial Engines/Aon Hewitt Study: “Help in Defined Contribution Plans: 2006 Through 2010.” September 2011.

2 Schwab Retirement Plan Services, Inc. in conjunction with Koski Research, "The New Rules of Engagement for 401(k) Plans," 2010.


Charles Schwab
Mike Peterson, 330-908-4334
Intermarket Communications
Eric Hazard, 212-754-5610

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