Workers identify sources they will use to
create a 20-year-plus “retirement paycheck”; expect 401(k) will
provide nearly half of retirement income
The area where 401(k) participants say they could most use help
is understanding how much they’ll need to save for retirement,
according to a nationwide survey of 1,000 401(k) plan participants
from Schwab Retirement Plan Services.
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Catherine Golladay, Executive Vice
President, Workplace Financial Services at Schwab (Photo: Business
Wire)
Over two thirds (68%) of participants gave an estimate of how
long their retirement savings will last, with the average being 24
years. The remaining 32% say they do not know how many years their
retirement savings might last, and the level of uncertainty is
higher among women (40%) than men (25%).
On average, participants in the study plan to retire at age 65
and estimated they need to save $1.9 million for retirement. The
top five areas they would like help with are:
- Calculating how much they need to save for retirement
- Anticipating tax expenses
- Determining their retirement age
- Creating an income stream in retirement
- Receiving specific advice on how to invest their 401(k)
“Every step of the way, retirement planning is a constant
balance between saving and spending. In the years before
retirement, we have to meet our day-to-day financial commitments
while still keeping an eye on our long-term savings goals. Once we
get to retirement, we want to be able to enjoy our hard-earned
savings, but also make them last, likely over a period of decades,”
said Catherine Golladay, executive vice president and head of
Workplace Financial Services at Charles Schwab & Co., Inc.
“Talking to a financial professional can provide important clarity
regardless of where you are on that journey. Even if you think your
financial situation doesn’t warrant outside help, having that
conversation with a professional is a valuable step to take.”
The study finds participants’ confidence in making investment
decisions in their 401(k) increases significantly with the help of
a financial professional. Almost half (49%) report they would be
very confident in their investment decisions with help versus only
a third (32%) feeling very confident on their own, yet only half
(50%) of those surveyed said they felt their situation warrants
financial advice.
Income in retirement: Where will it come from?
When it comes to building a retirement paycheck, participants
expect 44% of it to come from a 401(k). The remaining 56% is
expected to come from a range of different sources. Below are the
top five sources identified by the participants in the study, along
with the percentage they expect each source to contribute to their
retirement paychecks:
- 401(k) – 44%
- Social Security – 17%
- Savings and investments – 15%
- Traditional pensions/defined benefit plans – 10%
- Part-time work – 4%
Saving up
Contribution rates reflect the importance that participants are
placing in their 401(k)s. More than one in four (26%) say they
contributed the maximum allowed in 2019. In addition, the average
amount participants contributed to their 401(k)s was up 20%
compared to last year’s survey: $10,562 in 2019 vs. $8,788 in
2018.
Outside their 401(k), participants are more likely to be saving
for retirement in a savings account versus investing in the
markets. More than half (57%) say they are using a savings account
to save for retirement, while less than half say they are investing
for retirement in an IRA (48%) or a brokerage account (38%).
“You want every dollar working as hard as possible for you when
it comes to retirement savings,” said Golladay. “While consistent,
disciplined savings habits are critically important, the investment
choices typically available to you through an IRA or Health Savings
Account may have more growth potential, for example, than deposits
in a regular savings account.”
Retirement spending: Anticipating healthcare expenses
More than three-quarters (77%) of 401(k) participants are
offered a Health Savings Account (HSA) and almost half (45%)
currently use it.
For many, their HSA is helping to pay for their current health
insurance deductibles or unexpected short-term healthcare costs. In
addition, two in five (41%) currently are using their HSA to save
for healthcare costs in retirement. In 2019, 33% contributed enough
to their HSA to cover their immediate needs and set aside money for
retirement.
“Healthcare is one of the leading expenses that people need to
plan for in retirement. Like 401(k)s, HSAs are another way to save
and invest your money now to help you prepare for the future,” said
Golladay. “Increasingly, workplaces are adding HSAs to their
line-up of financial wellness solutions for employees, and long
term, this will be another important building block for people’s
retirement security.”
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. The survey is based on 1,000
interviews and has a three percent margin of error at the 95
percent confidence level. Survey respondents were actively employed
by companies with at least 25 employees, were 401(k) plan
participants 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 May 28 and June 11, 2020.
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., and Schwab Compliance
Technologies, Inc. (SchwabCT). DBS provides brokerage solutions for
corporate clients who monitor their employees' securities activity.
SchwabCT provides technology solutions for corporate clients to
help facilitate their compliance technology program implementation.
Schwab Retirement Plan Services, Inc., Schwab Compliance
Technologies, Inc., and Charles Schwab & Co., Inc. (Member
SIPC) 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.
© 2020 Schwab Retirement Plan Services, Inc.
(0920-0VK3)
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Mike Peterson Charles Schwab 330-908-4334
mike.peterson@schwab.com Travis Fishstein The Neibart Group
718-801-8205 SchwabRPS@neibartgroup.com
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