Participants Accept Responsibility for Retirement Saving, But…

A new survey from J.P. Morgan finds 401(k) participants embrace the responsibility of controlling their retirement savings, but without confidence to succeed.

Despite the steep market decline over the past year, only 4% of survey respondents said they had stopped contributing to their 401(k) plans. The survey found that following the market decline, saving for retirement came out as the top financial priority among participants (76%), followed closely by paying day-to-day expenses (69%). 

However, only 16% of 401(k) participants are extremely or very confident of reaching their retirement financial goals, and one in five said they are not at all confident they will reach their goals. Almost six in 10 indicated they are not confident their retirement savings will be enough to last throughout their retirement. Four in ten respondents said they are extremely/very concerned they will have to work longer than they planned, and nearly the same amount (36%) said they are extremely/very concerned they will never be able to retire. 

One in three respondents said they feel they could live comfortably on between 50% and 75% of their pre-retirement income during retirement, while 29% indicated it would take between 75% and 100% of pre-retirement income. However, only 28% of participants feel they are on track to receive between 50% and 75% of their pre-retirement income in retirement, and only 16% said they are on track to receive 75% to 100%. 

Nearly one in five plan participants admitted they really have no idea how much income they will need in retirement.

Considering the urgency with which the industry and government is compelled to provide participants with exhaustive educational information and full investment and fee disclosure, it is ironic that the majority of 401(k) plan participants surveyed by J.P. Morgan admitted they do not read the information they receive. For example, while 71% of participants agreed that there should be more disclosure about the fees associated with their investments, 67% said they do not take the time to read fee information they receive. 

When asked what they want more information about, the top five topics selected by participants included: 

  • 40% - How to make retirement savings last through retirement
  • 38% - How much savings to accumulate before retirement
  • 30% - How to invest for the long-term
  • 29% - Tax implications of investment decisions for retirement
  • 23% - How to invest retirement savings after retiring 

Three out of four participants said they have confidence in their own retirement savings decision-making - twice the number who indicated they trust their employer to make the decisions, and five times the number who said they trust the government. 

The study was conducted online within the United States by Harris Interactive among 1,077 respondents from April 24 to May 1, 2009.