Workers are more likely to get help changing their oil then they are to get professional investment advice on their 401(k), according to a new survey from Schwab Retirement Plan Services.
That’s not to say those workers don’t know the importance of their 401(k) – 87% of those surveyed say that the 401(k) is a “must-have” benefit, more than disability insurance, life insurance, extra vacation days or the ability to telecommute.
But the nationwide survey of 1,000 401(k) plan participants found that they were much more likely to have someone change the oil in their car (87%), help them landscape (32%), or help with their taxes (36%) than have someone help them choose their 401(k) investments (24%).
“Most people see a doctor when they’re sick or a mechanic when their car isn’t running, so why not seek professional help to manage something as important as their 401(k)?” said Steve Anderson, head of Schwab Retirement Plan Services, in a statement. “In many cases, there is a significant difference between how much people need for a comfortable retirement and what they are actually saving.”
Previous reports have found that most workers aren’t saving enough. Numbers from the Employee Benefit Research Institute show that 64% of workers between the age of 55 and 64 have saved an amount equal to one year of income.
Moreover, 90% of those surveyed by Schwab said they would be relying on themselves for the money needed to live in retirement, with more than 60% are saying their 401(k) is the primary or sole source of retirement savings, not considering Social Security.
“With so much at stake, the industry needs to take a more active role in delivering personalized investment advice to help individuals’ 401(k)s work harder for them,” Anderson added. “One-for-all default investments, such as target date funds or balanced funds, can’t be expected to meet the individual needs of workers. The industry can do better.”
While many 401(k) plans offer some type of professional, personalized investment advice, few workers are actually using it. The survey found that less than one-quarter of those with access to professional 401(k) advice have used it. Of those not using professional advice, almost half said they would expect better 401(k) results if they did. The confidence of a 401(k) participant to make investment decisions dramatically rose with the help of a financial professional, according to the survey. If they were to use the help of a financial professional, 70% of those surveyed said “they would feel extremely or very confident in their ability to make the right investment decisions,” while nearly 40% said they felt that same level of confidence making investment decisions on their own.
Anderson added in a statement, “With all of the information providers have about 401(k) participants – age, salary, account balance, savings rate, and more – why leave them on their own, or lump them into target date funds based only on their age when so much more can be done to personalize their savings plans? We know that professional advice can play an important role in helping people save more to bridge the retirement gap.”
According to the survey, six in 10 participants “are most likely to seek help with retirement planning once they start to approach retirement age, even though getting help sooner may lead to better outcomes.”
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