Are you reaching out to plan participants to provide guidance and advice? A new report says 70% of 401k plan participants would welcome the inquiry, but only 41% of participants surveyed said an advisor reached out to them over the past 12 months.
That’s one of the findings from Vestwell’s just-released 2020 Employee Retirement Trends Report: A look at 401k plans at the intersection of a pandemic, presidential election and racial unrest.
The survey of more than 1,000 plan participants shared insights on how this year’s sweeping trends intersect with 401k plans—and found 89% of them are actively contributing to their plan (although 41% have less than $10,000 saved for retirement).
The survey also highlighted a retirement savings gap that widens substantially when looking at African American and Hispanic/Latino populations. These two demographics typically save at lower rates for retirement, even though they generally align with Caucasians on how much they believe they should be putting away. The survey found 42% of Caucasians contribute more than 6% of their salary compared to only 26% of Hispanics/Latinos and 15% of African Americans. Almost 40% of Caucasian respondents have $50,000+ saved for retirement versus only 16% of Hispanics/Latinos and 11% of African Americans.
As far as participants welcoming advisors reaching out to them, Vestwell’s report says this illustrates the massive opportunity advisors have to connect with and influence participant behavior. “Not only can advisors help guide participants, but they can also work with plan sponsors to influence plan design and matching to encourage higher participation rates and more successful outcomes,” the report states.
Of those who are not contributing to their plans, 30% said that a company match would motivate them enough to begin contributing.
More key takeaways
- Few took loans: Despite the pandemic putting millions of Americans in tight financial situations, interactions with their 401k accounts remained relatively stable. Only 7% of respondents withdrew a loan, hardship distribution, or both. However, 40% of those who leveraged these funds said it was related to COVID-19 (where the CARES Act made it easy to take distributions).
- Make it automatic: Respondents generally agreed with President-Elect Joe Biden’s proposal to require any workplace that does not offer a pension to be required to offer a plan and auto-enroll participants. 74% of respondents said they support auto-enrolling plan participants at a set contribution rate with the option to opt out.
- Wary of crypto: Employees are hesitant about including Bitcoin or other cryptocurrencies in their 401k investment lineup, but are open to learning more. Of those surveyed 22% said yes to considering the funds while 38% said maybe.
Download the full report here.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
