A recent Wells Fargo and Gallup survey highlights a concerning gap in financial awareness, revealing that only one in three contributors to a 401(k) plan feels the need for 401(k) investment help, despite the low savings rate and many Americans being unprepared for retirement. This finding suggests an overly optimistic view among participants about their investment knowledge and highlights a critical demand for advice needs in managing their retirement plans effectively.
The survey, titled The Wells Fargo/Gallup Investor and Retirement Optimism Index, also finds that a majority of respondents give their employers high marks for the 401(k) education and information they provide.
About three-quarters of employed investors say their current employer offers a 401(k), and of these, 89% participate in the plan. The majority of those in a 401(k)–64%–say they can manage their plan by themselves, but 35% say they need advice from others.
A majority of 401(k) participants feel positive about the job their employer does providing them with the information they need to make informed decisions about their plan–31% rate their experience as “excellent,” while 43% rate it as “good.” A quarter rate their employer as subpar, including 19% saying their employer does an only “fair” job, and 6% saying a “poor” job.
When asked which of five aspects of investing they most need advice on, 32% of 401(k) investors want help knowing which funds to invest in, and 29% want 401(k) investment help knowing whether to reallocate their investments according to changing conditions. Lower on the list is deciding how much to contribute (8%), understanding the tax advantages of various plans (4%) and tapping their retirement money before retirement (1%).
“These plans are designed to be self-directed, but one out of three participants is saying ‘someone help me,’” said Joe Ready, director of Wells Fargo Institutional Retirement and Trust. “As an industry, we must understand their needs and 401(k) investment help provide people with useful tools and advice that ensure all investors are making the most of their plans.”
When asked about the effectiveness of ways employers provide employees information about managing their 401(k), investors ranked the top three: one-on-one meetings with a financial professional (71%), attending a seminar or formal presentation (46%) and posting information on the company website (40%).
While employment in the United States is improving, investors do not consider all jobs to be created equally. Investors were asked if temporary or contract work positions are generally good for the economy because they are jobs or bad for the economy because they don’t offer workplace benefits. The results tilt negative, with 52% seeing the trend of jobs without benefits as bad and 41% seeing this type of employment as good.
“This tells me that people grasp the importance of benefits as part of their employment picture – and this means healthcare and retirement plans,” Ready added. “Jobs without retirement plans may cause people to miss out on an opportunity to save for retirement in a systematic way through their employer.”
See Also:
- The One Thing You Must Do as a 401k Plan Advisor
- Retirement Benefits Sway Employees to Leave–Or Stay
- 401k Participants Are Seriously Stressed—Here’s Why
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.