The area where 401(k) participants say they could most use help is understanding how much they’ll need to save for retirement.
A survey of 401(k) plan participants from Schwab Retirement Plan Services finds two-thirds gave an estimate of how long their retirement savings will last, with the average being 24 years.
The remaining say they do not know how many years their retirement savings might last, and the level of uncertainty is higher among women than men.
On average, participants in the study plan to retire at age 65 and estimated they need to save $1.9 million for retirement.
The top five areas they would like help with are:
- Calculating how much they need to save for retirement
- Anticipating tax expenses
- Determining their retirement age
- Creating an income stream in retirement
- Receiving specific advice on how to invest their 401k
The study finds participants’ confidence in making investment decisions in their 401k increases significantly with the help of a financial professional.
Almost half report they would be very confident in their investment decisions with help versus only a third feeling very confident on their own, yet only half of those surveyed said they felt their situation warrants financial advice.
Income in retirement: Where will it come from?
When it comes to building a retirement paycheck, participants expect 44% of it to come from a 401k. The remaining 56% is expected to come from a range of different sources.
The top five sources identified by the participants in the study, along with the percentage they expect each source to contribute to their retirement paychecks, are:
- 401k – 44%
- Social Security – 17%
- Savings and investments – 15%
- Traditional pensions/defined benefit plans – 10%
- Part-time work – 4%
Saving up
Contribution rates reflect the importance that participants are placing in their 401ks. More than one in four say they contributed the maximum allowed in 2019.
In addition, the average amount that participants contributed to their 401ks was up 20% compared to last year’s survey: $10,562 in 2019 vs. $8,788 in 2018.
Outside their 401k, participants are more likely to be saving for retirement in a savings account versus investing in the markets.
More than half say they are using a savings account to save for retirement, while less than half say they are investing for retirement in an IRA (48%) or a brokerage account (38%).