Study of 401(k) Savers and Non-savers Finds
Major Gaps in Retirement Readiness
A new survey from Schwab Retirement Plan Services, Inc. reveals
that everyday money matters are dramatically impacting the lives
and retirement saving efforts of Americans. The nationwide survey
of 1,000 workers with access to a 401(k) plan – half of whom are
actively contributing to it (“savers”) and half of whom are not
(“non-savers”) – reveals that non-savers are increasingly
challenged by day-to-day financial stresses, compounded especially
by credit card debt.
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Steve Anderson, Executive Vice President
of Schwab Retirement Plan Services (Photo: Business Wire)
Regardless of whether survey participants are actively
contributing to a 401(k), the majority identify it as a primary
source of retirement savings. In fact, 60 percent of savers and 53
percent of non-savers who have at one time contributed to a 401(k)
say their 401(k) is their largest or only source of retirement
savings, even though the latter group is not currently
contributing. Furthermore, a quarter of non-savers say they are not
saving or investing for retirement at all right now.
“In comparing individuals now saving in their 401(k) plans and
those who aren’t, we uncovered some common challenges but also a
number of striking differences in the way each group thinks about
their overall financial picture,” said Steve Anderson, president,
Schwab Retirement Plan Services, Inc. “What’s important for
everyone to remember is that – no matter how far away retirement
may seem – the more you can prepare for it in the present, the
better off you’ll be at the end of your career.”
Bills, Bills, Bills: Short-term Financial Barriers Inhibiting
Long-term Saving
Workers in the survey identified a number of sources of
financial stress, with non-savers naming present-day challenges in
far greater numbers than their saving peers.
- More than twice as many non-savers as
savers say keeping up with monthly expenses is a significant source
of stress (42% compared to 20%).
- A full 45 percent of non-savers say
they either have no money left over or are actually behind on bills
at the end of each month, compared to 23 percent of 401(k)-savers
who say the same.
When asked about their primary obstacles to saving for
retirement, non-savers focused on immediate concerns including:
needing to pay basic monthly bills (46%), paying off credit card
debt (42%), covering unexpected expenses like home repairs (34%),
and paying medical bills (33%). Savers have similar concerns, but
generally in smaller numbers: unexpected expenses (36%), monthly
bills (31%), being unwilling to sacrifice things that add to their
quality of life (29%), and credit card debt (29%) top their
list.
In hindsight, non-savers recognize the impact that debt is
having on their ability to save. When asked to select the one thing
they would change about the way they managed their finances in the
past, 26 percent of non-savers say they would have accumulated less
debt, compared to just 13 percent of savers.
Ready or Not? Gaps in Retirement Preparedness Evident
The survey reveals a substantial gap in the way 401(k)-savers
and non-savers perceive their overall financial health. Eighty-five
percent of savers say they are in pretty good shape or very good
shape financially, compared to 64 percent of non-savers.
A closer look at savers reveals they are taking positive steps
with their 401(k) plans, with 66 percent saying they have increased
their contribution percentage in the past two years and 62 percent
saying they believe they are saving enough to retire when they want
to.
Outside of 401(k) plans, savings accounts and IRAs are the most
common methods of saving for retirement.
- Fifty-six percent of savers have a
savings account, and 47 percent have an IRA.
- Forty-four percent of non-savers have a
savings account and 23 percent have an IRA.
- More than a quarter of non-savers (26%)
are not currently saving or investing for retirement at all.
“Americans have many legitimate and immediate financial concerns
preventing them from setting aside funds for retirement. The good
news is that both 401(k)-savers and non-savers understand they are
responsible for their own retirement, and some may just need a
little guidance to help them take steps in the right direction,”
Anderson continued. “In many cases, their employers stand ready to
help, often through workplace financial wellness programs, with
resources and tools that enable them to formulate strategies to
meet their current obligations while still keeping an eye on the
future.”
Closing the Gap with Financial Wellness and Advice
The survey also reveals that personal financial stress can spill
over into the workplace, with 30 percent of non-savers and 21
percent of savers saying it has affected their job performance. The
majority of both groups – 86 percent of savers and 77 percent of
non-savers – would welcome a financial wellness program from their
employer, which could provide education, tools and resources to
help with their overall financial health.
However, when asked if they think their current financial
situation warrants professional financial advice, 40 percent of
savers and 44 percent of non-savers say no. This is true even
though both groups say their investment confidence would grow
dramatically with the help of a financial professional.
- Fifty percent of savers are
very/extremely confident making investment decisions on their own,
but 76 percent say they would be very/extremely confident if they
had the help of a financial professional.
- Similarly, 47 percent of non-savers are
very/extremely confident making investment decisions on their own,
but 70 percent say they would be very/extremely confident if they
had the help of a financial professional.
“It’s important for people to understand that whether you have
$1,000 or $100,000, your wealth merits help to maximize its
potential,” adds Catherine Golladay, senior vice president, 401(k)
Participant Services and Administration at Schwab Retirement Plan
Services. “A number of those we surveyed, especially the
non-savers, say they’re uncomfortable asking for help with their
finances. I’d encourage everyone to take advantage of all the
resources available to them so they can better manage their current
situation while putting away funds for their future
retirement.”
Other Notable Survey Findings
- Savers and non-savers alike are
self-reliant when it comes to funding their retirement. Eighty-nine
percent of savers and 79 percent of non-savers say they’re relying
on themselves or their spouses for their income in retirement.
- Likewise, Social Security isn’t
believed to be a sure thing. Just half of savers (52%) and
non-savers (50%) believe they will receive Social Security benefits
in retirement. Some 21 percent and 23 percent, respectively, say
they will not, and 27 percent of both groups are unsure.
- Savers and non-savers alike spent more
time researching their options the last time they bought a car (4
and 3.7 hours, respectively), took a vacation (3.7 and 3.3 hours)
or purchased a home appliance (2.9 and 2.7 hours) than they did
making a 401(k) investment choice (2.5 hours for both groups).
- Even though 401(k) investment fees can
have a dramatic impact on retirement savings, both savers and
non-savers say fees are less likely to influence their choice of
401(k) investments than they are their choice of a credit card,
online shopping destination, ATM or airline.
About the Survey
This online survey of U.S. workers eligible for a workplace
401(k) plan, half of whom are actively saving in it and half of
whom are not, was conducted by Koski Research for Schwab Retirement
Plan Services, Inc. Koski Research is neither affiliated with, nor
employed by, Schwab Retirement Plan Services, Inc. The survey is
based on 1,000 interviews and has a 3 percent margin of error at
the 95 percent confidence level. Survey respondents worked for
companies with at least 25 employees and were 25-70 years old.
Survey respondents were not asked to indicate whether they had
401(k) accounts with Schwab Retirement Plan Services, Inc. All data
is self-reported by study participants and is not verified or
validated. Respondents participated in the study between June 2 and
June 18, 2017. Detailed results can be found here.
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 and LinkedIn.
Financial tools and resources are available at
www.schwabmoneywise.com.
Disclosures
Through its operating subsidiaries, The Charles Schwab
Corporation (NYSE: SCHW) provides a full range of securities
brokerage, banking, money management and financial advisory
services to individual investors and independent investment
advisors. Its broker-dealer subsidiary, Charles Schwab & Co.,
Inc. (member SIPC, www.sipc.org), and affiliates offer a complete
range of investment services and products including an extensive
selection of mutual funds; financial planning and investment
advice; retirement plan and equity compensation plan services;
compliance and trade monitoring solutions; referrals to independent
fee-based investment advisors; and custodial, operational and
trading support for independent, fee-based investment advisors
through Schwab Advisor Services. Its banking subsidiary, Charles
Schwab Bank (member FDIC and an Equal Housing Lender), provides
banking and lending services and products. More information is
available at www.schwab.com and www.aboutschwab.com.
The Charles Schwab Corporation provides services to retirement
and other benefit plans and participants through its separate but
affiliated companies and subsidiaries: Charles Schwab Bank; Charles
Schwab & Co., Inc.; and Schwab Retirement Plan Services, Inc.
Trust, custody, and deposit products and services are available
through Charles Schwab Bank. Schwab Retirement Plan Services, Inc.
is not a fiduciary to retirement plans or participants and only
provides recordkeeping and related services. (0817-7ANJ)
Schwab MoneyWise® is provided by Charles Schwab & Co.,
Inc.
©2017 Schwab Retirement Plan Services, Inc. All rights
reserved.
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Charles SchwabMike Peterson,
330-908-4334mike.peterson@schwab.comorIntermarket
CommunicationsMike Gelormino,
212-754-5479mgelormino@intermarket.com
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