Employers and their employees hold different perspectives on how to best achieve retirement preparedness through 401(k) plans, according to the results of two newly released studies from Schwab Retirement Plan Services. Taken together, the studies indicate that, despite efforts by employers to educate workers on the 401(k) offering, most workers are unengaged and financially unprepared for retirement.
CFO Research Services, on behalf of Schwab, surveyed more than 200 senior finance and human resources executives from large and mid-sized U.S. companies about their perceptions of 401(k) plans in the workplace. Key findings include:
• More than half (54%) of employers report that employees participating in plans are not taking full advantage of the investment options, features and services offered in connection with their 401(k) plan.
• In order to better engage employees, the majority of employers plan to make as much or more extensive use of traditional outreach methods, including interactive planning tools (93%), printed educational materials (93%), and in-person workshops (81%).
• Only 16% of employers plan to adopt or promote personalized savings and investment management through a third-party adviser, despite evidence outside this survey of its positive impact on employee savings and investing behavior.
• A growing number of employers are using or considering the use of automatic solutions. In total, 45% are currently auto-enrolling employees and another 25% are very or somewhat likely to do so.
A separate survey of 401(k) participants finds that relatively few have the desire to manage their own workplace savings plan. Koski Research, on behalf of Schwab, surveyed more than 1,000 workers enrolled in 401(k) plans across the country and reveals that:
• More than half (52%) say they don’t have the time, interest or knowledge to properly manage their 401(k) portfolio.
• Nearly three-quarters (73%) spend less than eight hours per year managing their 401(k) plan account.
• Many (56%) do not review plan-related education materials they receive.
• Nearly one-third don’t know they pay any fees for their 401(k) plan. Of the 70% that understand they pay some sort of fees, 95% don’t know about investment fund operating expenses, and 67% don’t know about plan administration fees.
• A significant majority (83%) say they are interested in receiving professional investment management from their employer. However, this interest does not translate into action based on Schwab data that shows just one in 10 participants actually takes advantage of 401(k) investment management advice when it is offered.
“This data suggests that employers and their employees, while sharing a common goal of retirement preparedness, have different points of view on which engagement strategies are most effective in helping employees achieve that goal,” says Dave Gray, vice president of 401(k) client experience at Charles Schwab.
