Despite a positive outlook on retirement readiness, some employees are saying they regret the weekend brunches and lunchtime spa trips.
Employees are looking for help to better manage their current spending habits to prepare for retirement but still maintain a certain quality of life today, says a new survey from Schwab Retirement Plan Services. Two-thirds of participants say they wish they had spent less in the past to save more for retirement, especially on short-term pleasures like meals out, expensive clothing, new cars and vacations.
Paying for unexpected expenses (40%), being unwilling to sacrifice things that improve their quality of life (34%) and paying down credit card debt (31%) top the list of obstacles employees say they face when trying to save for retirement in the present, according the survey.
Workers are recognizing the importance of their 401(k)s, and the role they’ll play in achieving a comfortable retirement and will be looking to employers to for some extra bells and whistles.
A large number of workers rely heavily on their workplace retirement plans to help them meet their long-term goals, with 62% saying they expect their 401(k) to be their largest source of retirement income, according to the survey, with 88% saying a 401(k) is a “must-have” benefit and 90% saying they would think twice before accepting a job that didn’t offer one.
“The biggest takeaway for employers is that offering a 401(k) plan is a necessary first step, but it may no longer be all that’s required to attract and retain strong talent,” says Nathan Voris, managing director of business strategy at Schwab Retirement Plan Services. “Employees clearly value their 401(k)s, but many would appreciate additional support to make the right financial decisions.”
Workplace financial wellness programs are a great way to keep employees engaged while alleviating some of their finance-related stress, he adds. “Unfortunately, only about half of the people we surveyed have access to this type of program, so there is definitely room for more education and adoption.”
The survey found that workers would be very likely to take advantage of financial resources at work, including online tools to help plan for retirement and help from a professional to develop a financial plan. “We also know that financial wellness programs can help companies attract new employees and foster loyalty among existing employees,” Voris says.
Some employers have been successful in encouraging employees to engage with informational materials, consult with advisors and otherwise take advantage of financial wellness programs by offering specific incentives, like points that can be exchanged for rewards, a contribution to their health savings account or extra paid time off, Voris says.
“We’re seeing employers offer holistic financial wellness programs to help workers understand and take ownership of their overall financial health, from budgeting to saving toward specific goals to investing in a 401(k) and beyond,” he says. “This help can be communicated in various forms, like interactive websites, webinars, in-person seminars and individual consultations.”
The survey found that even though most workers want this kind of help, many of them feel as though their situation doesn’t warrant it, he added. According to the survey, while most (73%) employees think they know what percentage of their salary they should save in a 401(k), just over half (54%) say they know how much money they actually need to accumulate for a comfortable retirement. While the majority (71%) of respondents say they would like personalized investment advice specific to their 401(k), only about half (53%) believe that their current financial situation actually warrants professional help.
Employers have an important role to play in communicating how professional financial advice and financial wellness resources can help people at all levels of wealth make the most of their assets, says Catherine Golladay, senior vice president, 401(k) participant services and administration, at Schwab Retirement Plan Services.
“401(k) savers definitely have the right idea but could use help with the particulars,” Golladay says. “The good news is that many 401(k) plans today offer investment advice, and that advice isn’t meant just for the affluent. It’s meant for everyone. No matter how much money you have to save and invest, a professional can help you maximize its potential.”
