Are employees getting what they need from their 401(k)s?

Employees are desperate for retirement counsel, yet they're still unsure of where to find it. 

A recent report from Cerulli Associates reveals a significant gap in retirement planning support. Their research found that 63% of active 401(k) participants do not currently work with a financial adviser. But they're still looking for more retirement guidance: More than half of these unadvised individuals rely primarily on their 401(k) plan provider for retirement and financial planning advice. 

This trend presents a valuable opportunity for plan sponsors and recordkeepers to take a more proactive role in guiding participants through critical financial decisions. The need for this support is especially pressing given the state of participants' account balances. As of Q4 2024, the average 401(k) balance across all participants was approximately $131,700, reflecting an 11% increase over the previous year, according to analysis from Fidelity Investments. 

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However, the median balance tells a more sobering story, hovering between $30,600 and $35,000, and can vary widely across generational demographics. While average balances for workers in their 60s can approach $574,000, the median for that age group remains significantly lower at just over $210,000, according to Fidelity. These figures indicate that many employees, particularly younger and mid-career workers, remain at risk of falling short of their retirement goals.

For benefits managers, these statistics reinforce the urgency of improving retirement education and engagement strategies. Most participants lack confidence when it comes to complex planning decisions — fewer than 30% feel very confident navigating topics like tax implications, withdrawal strategies, and long-term income needs without assistance, Cerulli's report found.

With most employees treating their employer-sponsored retirement plan as their primary (and sometimes only) financial tool, the onus falls on employers and plan providers to deliver meaningful, accessible guidance.

"There is an opportunity for recordkeepers to establish themselves as a trusted adviser throughout the accumulation phase in order to retain and win assets," Elizabeth Chiffer, research analyst at Cerulli, said in a release. "Recordkeepers should guide participants to help them determine their optimal retirement savings goal, target retirement date, or overall vision for their life in retirement." 

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Collaborating with record keepers

Benefits managers can collaborate with record keepers to integrate more personalized and supportive plan features. Tools that encourage employees to set retirement goals, track their savings progress, and receive annual check-in prompts can significantly boost engagement. 

Additionally, tying 401(k) education to familiar moments — such as open enrollment, salary increases, or major life events — can help employees connect their retirement planning to their broader financial journey. Incorporating in-plan advice solutions, whether through digital planning tools or adviser access, can also improve confidence and outcomes.

Read more: Retirees have no financial plan: How benefit managers can help employees now

Behavioral nudges, like automatic contribution escalation and timely reminders about employer matches or catch-up contributions, have already helped raise the average employee deferral rate to over 14%, their data found. These strategies, combined with more holistic communication around financial wellness, can shift the 401(k) from a passive savings vehicle to an active part of each employee's long-term strategy. 

By building greater understanding, confidence, and engagement, benefits teams can help employees move beyond minimal balances and toward more secure retirements, and set attainable goals for the short and long-term. 

"Developing personalized prompts for participants to reassess their goal, track progress on their goal, and update their information, at least annually, drives engagement and provides a basis of conversation with the participant," Chiffer said. "Additionally, they can also take lessons from employee benefit enrollment to guide participants toward active decision-making on an annual basis."