Confusion, Apathy & Futility Rule Employees 401k Retirement Planning

In the survey released by CIGNA Retirement & Investment Services, titled "Trust & Consequences: Closing the Retirement Awareness Gap," many employees demonstrate a startling lack of awareness about the current state of their retirement security and are unclear, or simply unaware, about how to take full advantage of 401k and other workplace retirement programs. And while employees name their employers as highly trusted resources for reliable information on retirement planning, most say their companies could do much more to help.

• A combined 47% say they are either confused, apathetic or feel their situation is futile. They either don't have enough information about how or where to invest, don't see the point of investing if the market keeps dropping, or don't have the time to think about it;
• Another 39% feel they are "underwater," stating they can barely keep up with bills and don't believe they can afford to contribute more.

"These are critical factors preventing employees from showing the 'financial follow-through' necessary to take full advantage of their 401k's," said John Kim, President, CIGNA Retirement & Investment Services. "And it clearly underscores the need for employers and retirement plan providers to provide more education and information to demystify the retirement-planning puzzle, create more informed investors and motivate workers to take action."

Further, only 11% of American workers are contributing the maximum amount to their 401k plans according to data from the Employee Benefit Research Institute (EBRI). The EBRI 2002 Retirement Confidence Survey shows that employees have an average annual pre-tax 401k contribution rate of only 6.8%, compared with the up to 15% rate that most employer plans allow - which means average Americans are contributing roughly half of what they could to improve their retirement security.

It is obvious that employees need help in understanding not only how and where to invest, but that they must begin saving now to ensure their retirement security.

Employers Are Trusted

The CIGNA survey indicates that employers stand out as among the most trusted partners for workers who are struggling to take hold of their financial futures. Employers were trusted as much or more than private investment firms or mutual fund companies or personal brokers. In addition, according to the survey, strong majorities of employees would welcome the following tools and resources from their employer to help them better plan for their retirement security:

• 75% would trust their employer to provide them with retirement planning and education tailored to individual needs;
• 71% would trust their employer to provide them with specific advice and information on making investment choices, such as choosing mutual funds and stocks;
• 71% would trust their employer to provide them with information about managing their stock purchase plan or stock options.

Employers' Current Retirement Planning Efforts Falling Short

While the survey indicates that employees trust their employers for reliable retirement information and assistance, many believe their company's current efforts fall short, with 41% giving their employer a grade of "C" or lower for the quality of education and information they receive:

• Only 36% of survey respondents say they regularly receive communication from their employer about retirement planning;
• 33% say they receive retirement information from their employers "once in a blue moon;"
• 15% say they receive information only when they ask for it;
• Another 5% say they hear about retirement planning from their employers only during the annual open enrollment period.

Employees who say they are not contributing the maximum to their 401k's were asked what would encourage them to contribute more to their workplace-provided retirement programs. Nearly half of employees (47%) say employers could play a more significant role with the following:

• 29% say either better retirement planning education (16%) or more specific information from their employer on how to invest (13%) would help;
• 18% say a stronger company match would encourage them to contribute more;
• Beyond the role of the employer, more than one-third (35%) say a more certain economy would motivate them to contribute more.

Employees Want Your Help

"Given the strong relationship between most employers and their employees, it's not surprising that Americans are looking to the workplace for reliable financial-planning information and guidance. Workers want their employer to help them cut through the clutter and point them down the road to improved retirement security," said Kim.

"That means there's a great opportunity for employers to step up to the plate and provide employees the information and help they're looking for, and need. By delivering retirement-planning education and communication that is tailored to a worker's individual circumstances, employers can help close the awareness gap, stimulate financial follow-through, and provide their employees with a clearer understanding of, and better control over, their financial future," he added.

About the Survey

The "Trust and Consequences: Closing the Retirement Awareness Gap" survey, conducted by KRC Research, was fielded February 10-13, 2003. The survey included responses from 750 employees who participate in a 401k or other employer-sponsored retirement plan through their benefits package at work. The employee survey has a margin of error of +/- 3.6 percent at the 95% confidence level.

CIGNA Retirement & Investment Services, a division of CIGNA Corporation, is one of the nation's leading asset management and retirement services firms.

Further Reading

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