If anyone needs yet another reason to offer 401(k) investment advice, this may be it.
According to Lincoln Financial Group’s “2015 Retirement Power Participant Engagement Study,” there has been a dramatic uptick in the number of participants who follow their instincts when it comes to saving within their employer-sponsored 401(k) plans. The company claims the number of participants following their heart and not their head could be as high as 50 percent.
While these savers admit that their retirement savings habits are not ideal, they do agree that one-on-one meetings are the best way for them to receive information, creating an opportunity for plan sponsors to increase engagement and improve outcomes through in-person communication.
Lincoln’s study shows that the “adventurers”–one of 12 retirement plan participant profiles identified by the study–has increased the most dramatically, rising to 32 percent of all plan participants, from 17 percent in 2012. The retirement plan profiles in the study are determined based on a combination of three engagement levels – more engaged, on the fence and less engaged – and one of four decision-making styles:
- Advice seekers – typically rely on professional help and are confident in their ability to save
- Fact finders – turn to numbers and research, and tend to be optimistic but anxious about saving
- Instinct-followers – tend to act quickly, confidently and with little input
- Info-explorers – strive to gather broad input, which can cause information overload
The Adventurers is a group of less engaged instinct-followers, spanning all ages and income levels. The study suggests that this group could be doing more to save for retirement, as about half are saving less than 10 percent in their workplace retirement plan. They tend to be less retirement-focused than their peers, and the majority by their own admission are not doing a good job preparing for the future. The group may also need the most help setting – and ultimately achieving – their retirement goals. Only 16 percent have set a retirement goal this year, compared with 36 percent of the general population.
Making it Personal
When it comes to decisions such as how much money to contribute and what investments are made, 53 percent of all savers agree that in-person communication is the best method to motivate those decisions. Yet only three in 10 participants currently work with a financial professional, and only a quarter have a formal, written financial plan.
Lincoln’s study also reveals good news for those who set annual retirement savings goals: they are more likely to make smart savings decisions. Ninety-one percent of savers who have set a specific goal for the amount of money they’d like to set aside in retirement savings this year will meet or exceed their employer match. Retirement confidence is also closely tied to setting goals, as 87 percent of savers with a savings goal this year say they are optimistic about having enough money to maintain the lifestyle they want in retirement, compared to 57 percent of savers without a goal.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
