In a period marked by inflation, market volatility, and an upcoming tense presidential election, 401(k) plan participants are evolving their needs and preferences in saving for retirement.
New research by J.P. Morgan Asset Management highlights the changing expectations among participants, including a shift to retirement income support and financial wellness and education. According to the 2024 DC Plan Participant Survey of 1,503 participants, nine in 10 respondents believe financial wellness programs to be valuable, and well over half find SECURE 2.0 provisions, such as employer-sponsored emergency savings accounts and student loan matching, to be an attractive feature.
Participants linked the availability of retirement savings features as a key driver to their financial wellness. Seventy-two percent of respondents listed their workplace retirement plan as a critical component to their households’ financial wellness, and 85% identified retirement benefits as a significant factor in staying with an employer or leaving for a new opportunity.
Others showed support for retirement income tools, with nine out of 10 respondents expressing an interest for in-plan solutions that provide steady income in retirement. Having a guaranteed income source was also a key driver for participants to contribute more to their retirement, as only 43% said they were confident their retirement savings would last through their lifetime, reports J.P. Morgan.
“While it’s no surprise that participants seek retirement income support, it’s particularly noteworthy that guaranteed income options are highly attractive and can even motivate increased savings,” said Alexandra Nobile, Retirement Strategist at J.P. Morgan Asset Management. “Retirement plans continue to be a top priority for employees when evaluating employer benefits.
Need for guidance and proactive plan designs
Impacted by a series of volatile events, six out of 10 participants say they are not saving enough to achieve a financially secure retirement. This was especially true for women, 32% who think they have not saved enough, compared to 23% of men.
In its research, J.P. Morgan makes a note that while women-controlled wealth is anticipated to double in the next decade, women also tend to live longer than men, highlighting a need to generate adequate income to last their lifetime.
Top reasons for not saving more include high cost-of-living (43%), credit card debt (34%), not earning enough in their career (33%), expensive housing costs (30%), unexpected expenses (27%), other savings priorities (23%), health care expenses (18%), and student loan debt (14%), among others.
When asked to choose what, aside from a salary increase, would help motivate them to contribute towards retirement, 35% said adding a guaranteed lifetime income option within the plan would incentivize savings, while another 35% said automatically increasing contributions by 1% a year, with the option of cancelling the increases at any time, would help. Others said offering retirement income projections (31%) and providing a target amount on how much should already be saved (31%) would encourage them to save more.
Given the popularity of automatic features and set-it-to-forget-it funds, nearly nine out of 10 respondents had favorable or neutral views about automatic enrollment and auto-contribution escalation, while 89% said they liked the idea of having access to a target-date fund, which could provide consistent returns.
While a growing number of participants are researching financial budgeting and planning decisions without the insight of a financial advisor, three out of four participants continue to want guidance from a professional, and especially concerning their 401(k) investments and accounts, finds J.P. Morgan.
Yet, the research finds that only 54% of respondents receive 401(k) advice from a professional, down from 63% in 2021. This presents an opportunity for advisors to reach out to participants, J.P. Morgan adds.
“The DC Plan Participant Survey highlights the critical need for proactive plan design, professional guidance, and innovative retirement income solutions,” said Alyson Frost, head of Retirement Insights at J.P. Morgan Asset Management. “As participants face a volatile economic landscape, these insights are invaluable for plan sponsors and financial professionals aiming to enhance participant experiences and achieve stronger retirement outcomes.”
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.