Workers maintain savings rates but feel less
confident about reaching their goals
Inflation and market volatility are impacting workers’ ability
to save for retirement to a greater extent than last year,
according to a new survey from Charles Schwab. The annual
nationwide survey of 401(k) plan participants finds that 62% of
workers see inflation as an obstacle to saving for a comfortable
retirement, up from 45% last year, and 42% say stock market
volatility is an obstacle, up from 33% last year. Nearly eight in
ten (78%) say these conditions are impacting their spending and
saving habits, and 36% plan to delay retirement as a result.
“When inflation persists for an extended period of time, workers
are inevitably going to feel a deeper impact on their wallets,”
said Brian Bender, Head of Schwab Workplace Financial Services.
“While many workers are trying to cut back on spending, some costs
are unavoidable and certain areas of their finances have taken a
hit. Despite these challenges, retirement saving continues to be a
priority for workers, who have maintained their 401(k) savings
rates and largely stayed on top of their 401(k) investments over
the past year.”
Workers now believe they’ll need to save an average of $1.8
million for retirement, compared to $1.7 million last year. While
this amount hasn’t shifted drastically, only 37% of workers think
it’s very likely they’ll achieve this target, down by 10% from last
year. Confidence may have taken a hit, but savers are still
hopeful: nearly half still feel somewhat likely to reach their
goals and only 14% feel they are not at all likely to reach their
goals.
401(k): a must-have benefit
The 401(k) is becoming a non-negotiable for job seekers. When
considering a new employer, 88% of workers say it is a must-have
benefit and three in four would refuse a new job if it did not
offer a 401(k) plan. "Placing such a high priority on their 401(k)
is not surprising since it is their primary retirement resource,
with workers counting on it to deliver 40% of their retirement
income,” said Marci Stewart, Director, Communication Consulting and
Participant Education for Schwab Workplace Financial Services.
“That’s double what workers expect from the next closest source,
which is Social Security at 20% of retirement income.”
Compared to last year, more workers are also saving for
retirement in a savings accounts (68% vs 61%), investing in an IRA
(47% vs 33%) and investing through a brokerage account (38% vs 29%)
as they look to augment their primary retirement fund with other
methods of saving and investing.
Financial advice: new technologies emerge but workers still
prefer the human touch
Half of workers would feel comfortable asking artificial
intelligence tools like ChatGPT for help with financial planning,
but for now, actual adoption is very low (4%). Workers are still
most likely to follow advice from a human professional (95%) over
computer-generated advice (74%).
As in past years, the survey continues to underscore that advice
plays a pivotal role in workers’ confidence. Just 27% of workers
feel “very confident” making 401(k) investment decisions on their
own, while that level of confidence nearly doubles to 49% when
investment decisions are made with professional help. Most workers
(73%) say they would like personalized advice on their 401(k) plan
and 39% say they are already receiving such advice through their
plan at work.
Specifically, workers would like help calculating how much to
save for retirement (41%), how to invest their 401(k) (40%),
determining when they can afford to retire (38%), and creating a
retirement income stream (36%).
The SECURE 2.0 effect
In addition to the desire for basic retirement planning
guidance, workers also want help understanding how new regulatory
and legislative changes like the SECURE 2.0 Act affect their
retirement plan. The new law expands retirement plan coverage for
more workers and makes other changes to the retirement system to
help workers prepare for retirement.
Just over half (56%) of workers have heard of SECURE 2.0. Among
the provisions in the act, workers are most aware of the increased
age for required minimum distributions and the increased 401(k)
catch-up contribution limits starting in 2025 for those aged 60 to
63.
“It’s encouraging to see that many workers are in-tune with the
evolving rules and regulations surrounding their retirement plans,”
said Stewart. “By understanding what matters to employees,
employers can drive engagement as they fine tune their benefit
offerings to optimize recruitment and retention.”
About the survey
This online survey of 1,000 U.S. 401(k) plan participants was
conducted by Logica Research between April 19 and May 2, 2023.
Survey respondents were actively employed by companies with at
least 25 employees, were 401(k) plan participants and were 21-70
years old. Survey respondents include participants served by
approximately 15 different retirement plan providers. All data is
self-reported by study participants and is not verified or
validated. Detailed results can be found here.
About Charles Schwab
At Charles Schwab, we believe in the power of investing to help
individuals create a better tomorrow. We have a history of
challenging the status quo in our industry, innovating in ways that
benefit investors and the advisors and employers who serve them,
and championing our clients’ goals with passion and integrity.
More information is available at aboutschwab.com. Follow us on
Twitter, Facebook, YouTube, and LinkedIn.
Disclosures
Workplace Financial Services is a business enterprise which
offers products and services through Schwab Retirement Plan
Services, Inc.; Schwab Stock Plan Services; and Designated
Brokerage Services. Schwab Retirement Plan Services, Inc., provides
recordkeeping and related services with respect to retirement
plans. Schwab Stock Plan Services is a division of Charles Schwab
& Co., Inc. providing equity compensation plan services and
brokerage solutions for corporate clients. Schwab Designated
Brokerage Services (DBS), a division of Charles Schwab & Co.,
Inc., provides technology solutions for corporate clients with
regulatory requirements to monitor employee security transactions.
Schwab Retirement Plan Services, Inc., and Charles Schwab &
Co., Inc. are separate but affiliated entities, and each is a
subsidiary of The Charles Schwab Corporation.
Through its operating subsidiaries, The Charles Schwab
Corporation (NYSE: SCHW) provides a full range of securities
brokerage, banking, money management and financial advisory
services to individual investors and independent investment
advisors. Its broker-dealer subsidiary, Charles Schwab & Co.,
Inc. (member SIPC, www.sipc.org), and affiliates offer a complete
range of investment services and products including an extensive
selection of mutual funds; financial planning and investment
advice; retirement plan and equity compensation plan services;
compliance and trade monitoring solutions; referrals to independent
fee-based investment advisors; and custodial, operational and
trading support for independent, fee-based investment advisors
through Schwab Advisor Services. Its banking subsidiary, Charles
Schwab Bank, SSB (member FDIC and an Equal Housing Lender),
provides banking and lending services and products. More
information is available at www.schwab.com and
www.aboutschwab.com.
0723-362J
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version on businesswire.com: https://www.businesswire.com/news/home/20230802651052/en/
Mike Peterson Charles Schwab 330-908-4334
mike.peterson@schwab.com Carly Taylor The Neibart Group
973-618-6993 SchwabRPS@neibartgroup.com
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