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Workers More Serious About Their 401(k)s Than Hitting the Gym: Schwab

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How seriously do 401(k) plan participants take saving for retirement?

They consider it such an essential workplace benefit that 90% of plan participants in a new poll said they would think twice before taking a job in a company that did not offer a 401(k) plan.

Moreover, making the best 401(k) investment choices beat staying in shape by 68% to 59%. Indeed, nearly three-quarters of participants said they would rather have their plan balance grow by 15% this year than lose 15 pounds.

Sixty-four percent of those polled said they paid attention to 401(k) investment fees, compared with 60% who watched ATM fees, 50% airline baggage charges or 49% gym sign-up fees.

Schwab Retirement Plan Services on Wednesday released the results of a nationwide survey of 1,000 401(k) plan participants.

“When it comes to retirement, there’s been a significant shift of responsibility from employer to employee over the past 30 years, making the 401(k) plan a critical part of the retirement system,” Steven Anderson, head of Schwab Retirement Plan Services, said in a statement.

“Our survey found only one in five participants would be confident in their ability to save for retirement without a 401(k) plan.”

Fifty-nine percent of those surveyed said their 401(k) was their only or the largest source of retirement savings.

A quarter of participants said they had taken a loan from their 401(k), mostly to make a down payment on a house, to pay for home improvements or to cover everyday expenses.

Of the 91% who said they received a company match, 87% said they contributed enough to get the full amount form their employer.

Realities of Saving

Poll participants clearly recognized the importance of saving in a 401(k) plan, but also said doing so could be difficult because of competing priorities.

Thirty-five percent said they were not saving more for the future because they did not want to sacrifice their quality of life today.

They pointed to other obstacles to retirement saving: 31% each cited paying for unexpected expenses and covering basic monthly bills, 24% paying off credit card debt and 22% saving for education.

The survey found that even though 90% of those polled knew what their ideal credit score should be, only 58% were aware of how much they should save for a comfortable retirement. In addition, nearly half complained that materials explaining their 401(k) plan investments were more confusing than materials explaining their health and medical benefits.

And 29% said they had either decreased or not made any changes to their 401(k) savings rate in the last 24 months.

Anderson said many employers were using automatic enrollment, automatic savings rate increases and automatic investment advice to help their employees prepare for retirement. “The industry needs to focus more on plan design features like these if we are to further our goal of improving participant outcomes.”

Needing Advice

Survey participants said they valued professional 401(k) investment advice, even though relatively few were actually using it.

For example, 67% said they wanted personalized investment advice for their 401(k), and 79% said they were likely to seek professional help in order to make the best investment choices.

With professional financial advice, 73% said, they would be highly confident in their ability to make correct investment decisions, while only 44% said they would feel the same level of confidence left to their own devices.

Nevertheless, only 12% of participants said they were currently receiving professional advice for their 401(k), even though 49% acknowledged that they would expect better performance if they used advice.

How can employers motivate 401(k) participants to take advantage of advice despite their inertia or discomfort?

“We’ve observed that when advice is built into the plan so that participants start off with it and are free to opt out if they wish, nearly 86% stick with it,” Catherine Golladay, vice president of participant services and administration at Schwab Retirement Plan Services, said in the statement. “That can make a big difference.”

The Schwab statement noted that research by Morningstar Associates suggested that participants who received advice as part of a managed account service could accrue nearly 40% more income in retirement.

A National Issue

Schwab’s poll showed that 87% of respondents expected to rely on themselves for the money they would need to retire, and just about everyone in the survey believed that Americans were not saving enough for a comfortable retirement.

How did they grade politicians’ efforts to help Americans save for retirement? No easy passes here.

Eighty-nine percent gave state and federal elected officials a C or less, and 29% gave them an F.

Sixty-nine percent of survey participants said Americans’ ability to save for a comfortable retirement should be a major public policy focus. An equal percentage said this should be one of the key issues in candidate debates leading up to the 2016 presidential election.

— Check out Retirement Confidence Dips; Workers Not Counting on Social Security on ThinkAdvisor.

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