401(k) Word Cloud (Image: Shutterstock)

Workers who participate in their employer’s 401(k) retirement plan are increasingly anxious about long-term retirement savings, according to a survey released this week by Schwab Retirement Plan Services.

On average, these 401(k) participants say they need to save $1.9 million for a comfortable retirement, an increase of 12% from $1.7 million in last year’s survey.

“Saving for retirement has been a top financial stressor for people even when the markets were setting records and we were living through the longest bull market in history,” according to Catherine Golladay, head of workplace financial services at Charles Schwab.

“Now we are in a new reality where people are trying to navigate the health and financial challenges right in front of them, while also worrying about their long-term goals,” Golladay explained.

Proactive Engagement

The survey also finds that participant engagement is increasing. Forty-one percent of respondents have made changes to their 401(k) as a direct result of the coronavirus and its economic impact.

Fourteen percent of these proactive participants have rebalanced their portfolio, and 12% have increased their contribution rate. In addition, 8% have increased their stock funds/equity exposure, while 7% have decreased it.

Role of Advice

Financial advice appears to be playing a big role in prompting participants’ actions.

Among the 25% of survey respondents who consulted a financial professional, two-thirds have made changes in their 401(k) accounts — 26% by rebalancing them, 22% by increasing their contribution rate and 17% by increasing exposure to stock funds/equities.

Seventy-seven percent of survey participants report that their employer also is offering health savings accounts, and 45% said they use an HSA. Of these, 13% indicate they have done so this year to cover coronavirus-related expenses.

Demographic Differences

While the average amount survey participants believe they need to save for a comfortable retirement is $1.9 million, the average differs somewhat by generation. Millennials and Gen Xers say they need $2 million, while baby boomers think they need $1.6 million.

Gen Xers are the most downbeat about reaching their retirement goals. Only 32% believe it is very likely they can reach their goals, compared with 42% of millennials and 39% of boomers.

Millennial survey respondents are the most likely to increase their 401(k) contribution rate and their exposure to equities in the current environment, followed by Gen X and then boomers.

“Participants across all age groups expect their 401(k) savings to be the leading source of their retirement income, and overall concerns about saving enough and job security are significantly higher this year than we have seen in previous years,” said Golladay.

Logica Research conducted the online survey for Schwab between May 28 and June 11, and it included some 1,000 401(k) plan participants, ages 25 to 70, all working for firms with at least 25 employees.

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