Unless they get the "nudge" to save more, survey findings from Barclays show a majority of investors will do nothing if they believe they can't recover from losses.
"The real key to a successful 401(k) is sufficient savings rates," said Kristi Mitchem, head of Barclays Global Investors's U.S. Defined Contribution business. "This is why automatic savings features are vital to helping participants help themselves."
According to the survey of 1,000 401(k) plan participants in March, about half said they would save more to make up for their losses. However, that decreased to nearly one-fourth among those with a low confidence level.
The turmoil has forced participants to take a hard look at their 401(k)s as not a lump-sum income, but in the perspective of monthly income - and the fact that they might outlive their assets is generating a greater desire for guaranteed lifetime income. Forty-nine percent of participants said that guarantee should come from their employer.
"We found that participants are putting a greater emphasis on the monthly income that their savings will generate. The current economic downturn has focused participants' attention on financial stability in the form of guaranteed income," Mitchem said. "With the burden of retirement savings landing largely on the shoulders of individuals, it is crucial that plan sponsors provide participants with the tools to lighten that load."
The survey results send a signal to policy makers to bring income into the 401(k) discussion and suggest changes plan sponsors can make to restore the confidence of their participants in the face of an unstable economic future, according to Barclays. More than a third of plan participants admit they never look at their accounts, and the unnerving belief that they won't retire when planned is causing even more to put off looking at the damage.
"We believe 401(k) plans have been hit hard, but not knocked down. Through public policy and advancement of plan offerings, we can strengthen retirement outcomes for millions of Americans," Mitchem said.