Most Pre-Retirees Go Without 401(k) Advice
Just as how they struggle to know when to retire, many pre-retirees face challenges in determining how much money they’ll need in retirement.
A new Cerulli report shows that 45% of retirees believe they’re not saving enough, and 59% are unsure they’ll be able to properly calculate required savings.
Despite the introduction of retirement calculators, financial wellness tools, and advice solutions in recent years that could help investors estimate savings, participant utilization remains scarce. According to Cerulli, 71% of pre-retirees have not pursued financial advice or planning help from their 401(k) plan provider. Pre-retirees also displayed low usage of financial wellness tools offered by their recordkeeper, reports Cerulli.
“Participants might not recognize the full value of recordkeeper tools or available offerings if they are unable to implement the recommendations or if the recommendations are unspecific or confusing,” says Elizabeth Chiffer, a senior analyst with Cerulli.
“Reducing friction points,” like promoting advice offerings and growing accessibility with underserved populations, could increase usage. Collaborations between recordkeepers and plan sponsors to provide wellness and advice strategies may also help raise utilization, as it reduces confusion, encourages usage among participants, and retains participant assets, Cerulli reports.
“Recordkeepers need to evolve their messaging for pre-retirees,” says Chiffer. “Instead of emphasizing a shortfall, recordkeepers should shift participant focus to how they can make the savings they have work in retirement. Recordkeepers and plan advisors should work to develop or improve awareness and accessibility of financial planning tools for pre-retirees and work with plan sponsors to promote the advice solutions already available to pre-retirees.”
Recent findings show that employees believe their companies could improve in helping them understand workplace financial benefits. A Morgan Stanley at Work study found that 79% of workers say their employees could do a better job at enabling them to use benefits.
Findings in Morgan Stanley’s study pointed to a focus on integrated benefits strategies, where long-term planning, equity compensation, and retirement savings support are key to employee financial confidence and organizational performance.
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news.