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The State of 401k Investing - New Schwab Survey


SAN FRANCISCO, CA, August 15, 2013 -- The majority of American workers in a new survey accept responsibility for financing their own retirement and are relying primarily on their 401k to get them there, but many lack the confidence to effectively manage their retirement savings.

The nationwide survey of more than 1,000 401k plan participants, commissioned by Schwab Retirement Plan Services ("Schwab"), shows a high level of self-reliance among respondents. Roughly nine in ten (89%) say they are counting on themselves for the money to support their retirement, and just five percent expect to rely mostly on the government for financial help after they stop working full time.

This self-reliance is fueled by anticipated use of 401k plans. A large majority of survey respondents (61%) report the 401k is their only or largest source of retirement savings. More than half of respondents (55%) have increased their savings rate in the last two years and most (70%) say their 401k is in better shape now than ever before.

"It's gratifying to see so many people taking the reins of their retirement," said Steve Anderson, head of Schwab Retirement Plan Services. "In our view, contributing to a 401k plan should be the number one savings priority for workers. Planning ahead, taking action and getting the help you need along the way are key steps to help build sufficient retirement savings."

Still, many are unsure how to invest...

Interestingly, the survey reveals that saving in a 401k is not enough to ensure confidence for many participants. For example:

  • More than half (52%) find explanations of their 401k investments more confusing than explanations of their health care benefits (48%).
  • Fifty-seven percent wish there was an easier way to figure out how to choose the right 401k investments.
  • Nearly half (46%) don't feel they know what their best investment options are and one-third (34%) feel a lot of stress over correctly allocating their 401k dollars.

...And they want help

Today, many 401k plans offer some type of professional advice, which can be vital in helping people take better control of their investments. Of those surveyed, 61 percent want personalized investment advice for their 401k. Participants expressed a desire for guidance on everything from asset allocation to risk tolerance and retirement income planning.

Most importantly, the survey found that investment confidence nearly doubles when workers have the help of a financial professional. Approximately one-third (32%) of survey participants expressed confidence in making the right 401k investment choices based on their own ability, compared to 61 percent if they also had the help of a financial professional.

"Getting more workers engaged in professional 401k advice should be a top priority for employers. We've seen the positive impact it can have on both behaviors and outcomes," said Anderson. "At Schwab Retirement Plan Services, Inc., participants who used third-party, professional 401k advice tended to increase their savings rate, were better diversified and stayed the course in their investing decisions," he noted.*

Additional findings

Other findings show respondents are engaged and place a priority on their 401k:

  • Save it, don't spend it: Given a choice about how to use a $5,000 bonus, nearly two-thirds (64%) would save it in their 401k rather than take the cash now. Forty-eight percent immediately chose the 401k route and an additional 16% chose the 401k after tax consequences were explained.
  • Post-crisis recovery: Seventy-four percent of respondents said their 401ks have recovered from the financial crisis about as fast as or even faster than expected.
  • Check the index: Nearly three-quarters (74%) would rather pay low investment fees for index funds than pay higher fees for actively managed funds that could potentially outperform the market, but may also carry greater risk.

About the Survey

This online survey of U.S. 401k participants was conducted by Koski Research for Schwab Retirement Plan Services, Inc. The survey is based on 1004 interviews and has a three percent margin of error at the 95% confidence level. Survey respondents worked for companies with at least 25 employees, were current contributors to their 401k plans and were 25-75 years old. Survey respondents were not asked to indicate whether they had accounts with Charles Schwab. All data is self-reported by study participants and is not verified or validated. Respondents participated in the study between June 5 and June 11, 2013. Detailed findings can be found at www.aboutschwab.com/press/research.

About Charles Schwab

At Charles Schwab we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients' goals with passion and integrity.

More information is available at www.aboutschwab.com. Follow us on Twitter, Facebook, YouTube, LinkedIn and our Schwab Talk blog.

Infographic of Survey Results

Infographic of Survey Results


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