Americans know a lot. We have all the data to know that physical exercise is important, nutritious diets improve our health, distracted driving is a bad choice, and saving for retirement when we are younger is a great idea. However, roadblocks (often in the form of fear and uncertainty) frequently prevent us from acting on all that information.
Charles Schwab’s 2019 401(k) Participant Survey found that while Americans believe they need 1.7 million dollars, on average, to retire, many are not taking the appropriate measures to reach that goal. Advisors must equip their clients not only with the knowledge of what to do, but also with the motivation and ability to take the appropriate steps to meet their goals.
Nearly 60% of the survey respondents identified their 401(k) as their only or largest source of retirement savings, which makes the following findings particularly alarming:
- Half of the respondents are contributing 10% or less of their salary to their 401(k).
- Less than half have increased their contribution amount in the past two years.
- Of those who were auto-enrolled in their plan, one-third have never increased their contribution rate, and 44% have never changed their investment selections.
A set-it-and-forget-it approach to retirement can leave retirees underfunded and in a difficult position when they want to retire or have to retire due to poor health or other unforeseen circumstances. Americans need help to fully utilize their 401(k) plans and discover additional ways to reach their goals.
Many people are intimidated by the thought of investing. The survey showed that two-thirds of respondents labeled themselves as “savers” rather than “investors.” Steve Anderson, president of Schwab Retirement Plan Services, stressed that “it’s important for anyone with a 401(k) plan to understand that they’re already an investor, whether they realize it or not.” By shifting your clients’ mindset in this way, you can help them become more actively engaged in their retirement preparedness.
The survey identified specific areas in which the survey participants expressed a need for help. Based on those findings, we recommend posing these questions to jumpstart a meaningful conversation with clients:
- Do you understand how your 401(k) investment is working for you?
- Do you know the age at which you can afford to retire?
- Have you figured out what your expenses will be in retirement?
- Have you calculated how much you need to save for retirement?
Saving enough for a comfortable retirement is the top source of financial stress for many Americans. Many of us have faced similar obstacles as we attempt to balance daily needs and struggles with the knowledge that financial decisions made earlier in life have a significant impact on our financial future. We commend your effort as a financial advisor to guide people in their retirement journeys, providing them with the tools, encouragement, and guidance needed for retirement readiness.