Why do some workers save and others don’t, especially when both have access to a 401k plan?
It’s a question asked and answered by Schwab Retirement Plan Services, and the investing giant found that non-savers are increasingly challenged by day-to-day financial stresses, compounded especially by credit card debt.
Regardless of whether survey participants are actively contributing to a 401k, the majority identify it as a primary source of retirement savings.
In fact, 60 percent of savers and 53 percent of non-savers who have at one time contributed to a 401k say their 401k is their largest or only source of retirement savings, even though the latter group is not currently contributing.
Furthermore, a quarter of non-savers say they are not saving or investing for retirement at all right now.
“In comparing individuals now saving in their 401k plans and those who aren’t, we uncovered some common challenges but also a number of striking differences in the way each group thinks about their overall financial picture,” Steve Anderson, president of Schwab Retirement Plan Services, said in a statement.
Bills, Bills, Bills: Short-term Financial Barriers Inhibiting Long-term Saving
Workers in the survey identified a number of sources of financial stress, with non-savers naming present-day challenges in far greater numbers than their saving peers.
- More than twice as many non-savers as savers say keeping up with monthly expenses is a significant source of stress (42 percent compared to 20 percent).
- A full 45 percent of non-savers say they either have no money left over or are actually behind on bills at the end of each month, compared to 23 percent of 401(k)-savers who say the same.
When asked about their primary obstacles to saving for retirement, non-savers focused on immediate concerns including: needing to pay basic monthly bills (46 percent), paying off credit card debt (42 percent), covering unexpected expenses like home repairs (34 percent), and paying medical bills (33 percent).
Savers have similar concerns, but generally in smaller numbers: unexpected expenses (36 percent), monthly bills (31 percent), being unwilling to sacrifice things that add to their quality of life (29 percent), and credit card debt (29 percent) top their list.
In hindsight, non-savers recognize the impact that debt is having on their ability to save. When asked to select the one thing they would change about the way they managed their finances in the past, 26 percent of non-savers say they would have accumulated less debt, compared to just 13 percent of savers.
Closing the Gap with Financial Wellness and Advice
The survey also noted that personal financial stress can spill over into the workplace, with 30 percent of non-savers and 21 percent of savers saying it has affected their job performance.
The majority of both groups–86 percent of savers and 77 percent of non-savers–would welcome a financial wellness program from their employer, which could provide education, tools and resources to help with their overall financial health.
However, when asked if they think their current financial situation warrants professional financial advice, 40 percent of savers and 44 percent of non-savers say no.
This is true even though both groups say their investment confidence would grow dramatically with the help of a financial professional.
- Fifty percent of savers are very/extremely confident making investment decisions on their own, but 76 percent say they would be very/extremely confident if they had the help of a financial professional.
- Similarly, 47 percent of non-savers are very/extremely confident making investment decisions on their own, but 70 percent say they would be very/extremely confident if they had the help of a financial professional.
“It’s important for people to understand that whether you have $1,000 or $100,000, your wealth merits help to maximize its potential,” added Catherine Golladay, senior vice president, 401k Participant Services and Administration at Schwab Retirement Plan Services. “A number of those we surveyed, especially the non-savers, say they’re uncomfortable asking for help with their finances. I’d encourage everyone to take advantage of all the resources available to them so they can better manage their current situation while putting away funds for their future retirement.”