Although participation and contribution rates are fairly high in 401(k) plans, Natixis found many participants are still facing retirement shortfalls, especially baby boomers.
Boomers, who started their careers before the advent of 401(k) plans, lag younger savers by a significant percentage. A third of boomers have saved less than $50,000 for retirement, while 41% of millennials have at least that much.
Natixis noted, though, that regardless of age, many participants don’t have a clear understanding of their future retirement needs. Boomers have saved an average $262,541, a third of the estimated $805,398 they’ll need in retirement. Gen X savers have an average $206,866, with a goal of over $1 million. Millennials, many of who may be just starting out, have just over $91,000 saved, but Natixis found their goal may be too low: $822,000.
“Investors of all ages should take a second look at how much they save and what their needs are likely to be when they retire,” John Hailer, CEO of Natixis Global Asset Management in the Americas and Asia, said in a statement. “While many workers get it right, others might ask if their investing targets will get the job done. Too many seem to be setting the bar too low because they may lack access to the proper tools, education and guidance.”
That education and guidance may be the most important factor in getting savers to a positive retirement outcome, because as Natixis found, they are saving. Participation is 90% and on average, workers contribute 8.6% of their salary to their 401(k) plan. The survey found 93% have recently increased their contribution or are likely to, and 72% have never missed a contribution.
Unfortunately, retirement materials provided by employers are confusing, and employees aren’t using their tools available to them through their workplace plan. Forty-three percent of workers said the materials offered them are hard to understand. Although more than half of respondents said their employer offers personalized performance benchmarks, just 23% have used them.
Additionally, a third of respondents said they don’t know where their money is being invested.