Apparently splurging on steaks and blowing boatloads on BMWs isn’t all it’s cracked up to be.
The latest research from Schwab Retirement Plan Services found that almost two-thirds (64 percent) of Americans with a 401k wish they’d spent less on meals out, new cars, expensive clothing and vacations. Instead, they would’ve liked to have racked up more retirement savings.
In a survey of 1,000 employee participants, two in five say saving for retirement is their top source of financial stress. Paying for unexpected expenses (40 percent), being unwilling to sacrifice things that improve their quality of life (34 percent) and paying down credit card debt (31 percent) are getting in the way of saving as much as they’d like.
Other pricey expenditures are less troubling to plan participants, Schwab noted, such as housing, weddings, student loans and kids’ tuition.
“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,” Steve Anderson, president, Schwab Retirement Plan Services, Inc., said in a statement.
Despite fears about saving too little, seven out of 10 people with a 401k still believe their quality of life in retirement will be better than their parents’ and children’s, and 62 percent expect their 401k to pay for most of it.
As such, the vast majority of respondents say a 401k is a “must-have” employee benefit (88 percent) and they’d think twice about accepting a job from an employer who didn’t offer one (90 percent).
“[P]articipants understand the value of their 401ks 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,” Anderson added.
For instance, aside from their employer-sponsored retirement account, 401k savers are most likely to be putting money into a savings account, when an IRA or other investment vehicle would almost certainly grow money faster. And only a fifth of respondents put the money they have left after paying monthly bills toward their 401k or other investments.
Participants are fortunately open to advice. Schwab discovered most respondents “would be highly likely to take advantage of resources at work, including online tools to help plan for retirement (88 percent) and help from a financial professional to develop a financial plan (77 percent).”
Over two-thirds think their financial confidence would improve if they had help from a professional, and over half believe professional advice would lead to better investment performance.
Among those surveyed, the areas in which respondents would most like assistance are:
- Calculating how much money to save for retirement (43 percent);
- Receiving specific advice on how to invest their 401k (39 percent);
- Determining at what age they can afford to retire (39 percent); and
- Figuring out what their expenses will be in retirement (36 percent).
“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.”
Jessa Claeys is a writer, editor and graphic designer.
