Employees are changing financial habits and
want advice
Inflation is now the top obstacle to saving for a comfortable
retirement, according to a new survey from Schwab Retirement Plan
Services. The annual nationwide survey of 401(k) plan participants
finds that workers rank inflation (45%) ahead of other obstacles
including keeping up with monthly expenses (35%), stock market
volatility (33%), and unexpected expenses (33%).
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Catherine Golladay, Head of Schwab
Workplace Financial Services (Photo: Business Wire)
“Workers have been through a lot over the past two years and
it’s only natural that recent economic and geopolitical turbulence
has continued to fuel financial concerns,” said Catherine Golladay,
Head of Schwab Workplace Financial Services. “While plan
participants can’t control inflation or the markets, the good news
is they are taking steps to manage their finances with an eye to
the future.”
Workers believe they’ll need to save an average of $1.7 million
for retirement, down from $1.9 million reported in last year’s
survey, and just under half (47%) feel they are very likely to
reach their retirement savings goal. They expect the 401(k) to be
their primary financial resource in retirement, providing 37% of
income, followed by Social Security (17% of income).
Workers change how they save, spend and invest
In response to rising costs and market volatility, 79% of
workers are changing their saving and spending habits, while 44%
have altered their 401(k) investments.
Workers are cutting spending by reducing the number of purchases
they make (34%), buying cheaper products (32%), and paying off debt
more slowly (21%). Despite the belt tightening, workers are still
saving less (33%) and spending more in general (30%). They are
saving less for emergencies (20%), investing less outside their
401(k)s (18%) and contributing less to their 401(k)s (15%).
Almost one quarter of workers say they plan to retire later as a
result of the pandemic. One third of plan participants do not know
how long their savings are likely to last in retirement, and the
two thirds who offered an estimate say they expect their retirement
savings to last 23 years on average.
Employers address financial stress among workers
Financial strain continues to take a toll on mental health. Only
15% of employees say they have not been under financial stress, and
more than a quarter of respondents (26%) say stress about their
financial situation has impacted their ability to do their job in
the past year, similar to last year’s survey findings.
“Many workers say their employers have helped them manage
financial stress in the past year,” said Golladay. “With talent
management top of mind for so many employers, demonstrating support
for employees through tough times plays a key role in both loyalty
and recruitment.”
The majority of employers (60%) took action to help workers
manage financial stress in the form of increased pay (32%),
increased 401(k) match (23%), and additional bonus (20%). Some also
decreased hours to allow for better work-life balance (11%).
Advice increases worker confidence
Most workers say their financial situation warrants professional
advice (60%). More than half (55%) say they would be very confident
making 401(k) investment decisions with the help of a financial
professional, compared to just 38% who say they are very confident
making 401(k) investment decisions on their own.
Specifically, plan participants want help with:
- How to invest their 401(k) account (43%)
- Calculating how much money to save for retirement (42%)
- Creating an income stream in retirement (38%)
- Determining at what age they can afford to retire (36%)
- Anticipating taxes in retirement (32%)
However, workers see barriers to accessing advice through their
workplace plan. They cite cost (23%), advice limitations (22%),
lack of awareness (19%), and confidentiality concerns (18%) among
the reasons they wouldn’t seek financial advice via their
employer.
“Workers are facing an array of economic challenges that are
driving their demand for financial advice. Employers can help by
debunking misconceptions about financial advice available through
the workplace,” said Golladay. “Many employers offer different
levels of advice at no additional cost or low cost, and workers
tell us making 401(k) investment decisions with the help of a
financial professional would make them more confident, which is one
of the most important factors in their financial well-being.”
About the survey
This online survey of U.S. 401(k) participants was conducted by
Logica Research for Schwab Retirement Plan Services, Inc. Logica
Research is neither affiliated with, nor employed by, Schwab
Retirement Plan Services, Inc. A total of 1,000 plan participants
completed the survey. Survey respondents were actively employed by
companies with at least 25 employees, were 401(k) plan participants
and were 21-70 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 April 4 and April 19, 2022. 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 aboutschwab.com. Follow us on
Twitter, Facebook, YouTube, and LinkedIn.
Disclosures
Schwab Retirement Plan Services, Inc. and Charles Schwab &
Co., Inc. are separate but affiliated companies and subsidiaries of
The Charles Schwab Corporation. Schwab Retirement Plan Services,
Inc. provides recordkeeping and related services with respect to
retirement plans. Brokerage products and services are offered by
Charles Schwab & Co., Inc.
Workplace Financial Services is a business enterprise which
offers products and services through Schwab Retirement Plan
Services, Inc.; Schwab Stock Plan Services; and Compliance
Solutions. Schwab Retirement Plan Services, Inc., provides
recordkeeping and related services with respect to retirement
plans. Schwab Stock Plan Services is a division of Charles Schwab
& Co., Inc. providing equity compensation plan services and
brokerage solutions for corporate clients. Compliance Solutions is
comprised of Schwab Designated Brokerage Services (DBS), a division
of Charles Schwab & Co., Inc. DBS provides brokerage solutions
for corporate clients who monitor their employees' securities
activity. Schwab Retirement Plan Services, Inc., and Charles Schwab
& Co., Inc. are separate but affiliated entities, and each is a
subsidiary of The Charles Schwab Corporation.
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, SSB (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.
0622-2NYT
© 2022 Schwab Retirement Plan Services, Inc.
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Mike Peterson Charles Schwab 330-908-4334
mike.peterson@schwab.com
Carly Taylor The Neibart Group 973-618-6993
SchwabRPS@neibartgroup.com
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