Recognizing the fact that November will mark the 40th anniversary of the legislation that paved the way for 401(k) plans, Charles Schwab conducted a survey of Baby Boomers’ attitudes towards their 401(k) plans. Schwab notes that Boomers are the first generation to have access to a 401(k) plan for a majority of their career.
Seventy-five percent of Boomers said they believe their 401(k) plan is in better shape now than ever before. The survey of workers between the ages of 54 and 70, and who are currently saving in their 401(k) plan, also found that only 16% expect to work in retirement due to needing the money. Forty percent said they would like to work in retirement in some capacity, and 25% said they do not plan to work at all in retirement.
Nearly three-quarters of Boomers said they think their quality of life in retirement will exceed that of their parents, and 78% think it will be better than younger generations’ retirement years.
However, 36% said they do not know how much they will need to safely retire, and 25% do not know how much of their salary they should be saving. Twenty percent said they do not understand the process for withdrawing money from their 401(k) in retirement.
“Forty years ago, we might not have anticipated that the weight of Americans’ retirement would rest so squarely on the shoulders of the 401(k) plan,” says Catherine Golladay, senior vice president, participant services and administration at Schwab Retirement Plan Services. “While it is encouraging that so many Boomers are confident in their ability to retire comfortably, it is not surprising that a large percentage of them are feeling unprepared as they approach the end of their careers.”
Forty-six percent of Boomers said their 401(k) plan will be the largest source of their income in retirement, followed by savings outside of the plan (23%), Social Security (19%) and a pension (11%).
Eighty-one percent of Boomers expect to use their 401(k) funds to cover day-to-day expenses, followed by travel (40%), health care expenses (36%), housing (21%), medical expenses (20%) and offering financial assistance to their children and/or grandchildren (8%).