Two-thirds want 401(k) Investment Advice, only 12 Percent Get It

investment advice

It’s takes a while to get to the good stuff, but here it is; 67 percent of 401(K) participants want personalized investment advice but only 12 percent said they’re currently getting it.

It’s just a few interesting points buried in a new report from Schwab. It finds the 401(k) is viewed as an essential workplace benefit, but respondents also note that saving can be difficult and cite a number of concerns and competing priorities that interfere with their ability to meet retirement goals.

More than one-third (35%) say they aren’t saving more for tomorrow because they are unwilling to sacrifice their quality of life today – expenditures like dinners out and vacations. Other top obstacles to retirement saving include paying for unexpected expenses (31%), covering basic monthly bills (31%), paying off credit card debt (24%) and saving for education (22%). Other key findings include:

  • While 90 percent know what their ideal credit score should be, only 58 percent know how much they should save for a comfortable retirement.
  • Nearly half (47%) say that materials explaining their 401(k) plan investments are more confusing than materials explaining their health & medical benefits.
  • Roughly three in ten (29%) have either decreased or not made any changes to their 401(k) savings rate in the last two years.

According to the survey, professional 401(k) investment advice is something that participants say they value, even though relatively few are actually using it. For example:

  • 73 percent say they would be very or extremely confident in their ability to make the right investment decisions with the help of a financial professional, versus only 44 percent who would feel that same level of confidence on their own;
  • Yet only 12 percent of participants questioned are currently getting professional advice for their 401(k), even though nearly half (49%) say they’d expect better performance if they used advice.

“Most participants want 401(k) advice, but whether because of inertia or discomfort, many don’t take that first step of asking for help,” said Catherine Golladay, vice president of participant services and administration at Schwab Retirement Plan Services. “We’ve observed that when advice is built into the plan so that participants start off with it and are free to opt out if they wish, nearly 86 percent stick with it. That can make a big difference.”

Schwab cites research from Morningstar that suggests participants receiving advice as part of a managed account service could end up with nearly 40 percent more income in retirement.

John Sullivan
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With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.

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