Education Can Help ‘Savers’ Feel Confident Like ‘Investors’

Nearly all of those responding to a new Schwab survey say they would feel confident about making the right financial decisions with professional help, yet only half feel their current situation warrants professional advice.

Schwab Retirement Plan Services published a new survey report that offers advisers a bird’s eye view into the various trends and topics that are top-of-mind for retirement plan participants.

Of particular interest to the advisory community, nearly all of those surveyed (95%) say they would feel confident in making the right financial decisions with professional help. On the other hand, just half of participants (52%) feel their situation actually warrants financial advice.

According to Steve Anderson, president of Schwab Retirement Plan Services, the Americans surveyed seem to have a realistic target for retirement, but many likely aren’t on track to get where they want to go. Too many overlook the potential benefits of getting advice, he adds.

“It’s important for anyone with a 401(k) plan to understand that they’re already an investor, whether they realize it or not,” Anderson says. “Shifting your mindset from ‘saving for retirement’ towards ‘investing for retirement’ can help you to better understand that you are participating in the market when you contribute to a 401(k), and ultimately better help you reach your goals.”

About two-thirds of those surveyed say participating in a 401(k) plan was their first experience with investing, but when it comes to using a 401(k), 64% view themselves as savers rather than investors. The survey also shows that outside of a 401(k), participants are more likely to use a savings account to prepare for retirement than any type of investment account.

Survey participants named some of the specific areas where they would like help, including determining at what age they can afford to retire (41%); calculating how much they need to save for retirement (40%); receiving specific advice on how to invest their 401(k) (37%); and figuring out what their expenses will be in retirement (35%).

Catherine Golladay, chief operating officer, observes that many of those surveyed seem to be taking a “set it and forget it” approach to their 401(k), with less than half saying they have increased their contribution percentage in the past two years. And when asked how they decided how much to contribute to their plan initially, 55% say they chose a percentage they were comfortable with, 36% contributed as much as their employer matched and 8% were automatically enrolled at a default percentage chosen by their employer.

“Any effort to set aside money for the future is worthwhile. That said, money intended for retirement has far more growth potential if it’s invested through an IRA or health savings account, for example, than if it’s placed in a regular savings account,” Golladay says. “Having access to more investment education could help participants get more out of their investments, both inside and beyond their 401(k) accounts.”

Other survey results show many participants leverage and find value in web-based financial tools, with just over half (52%) saying they have used an online retirement calculator. Of those who have used one, 71% felt encouraged and wanted to learn more, and 61% took positive actions related to their finances, such as increasing their 401(k) contributions, changing their spending habits or accessing online advice.

“It’s so encouraging to see people using online resources to take their financial pulse, and even more encouraging that many are taking action. The next step would be talking with a financial professional, a service many people can access through their 401(k),” Golladay adds. “We believe everyone can benefit from professional financial advice, and by offering it at work, employers can help move their employees from saving to investing to true financial ownership.”

According to the survey, the vast majority of participants (87%) consider a 401(k) a must-have benefit. Only health insurance ranked higher (89%). The top obstacles participants face when trying to save for retirement are paying for unexpected expenses like home repairs (37%), paying off credit card debt (31%), and needing enough money for basic monthly bills (30%). Fourteen percent named paying off student loans as an obstacle.