Schwab 401(k) Survey Shows Sharp Increase in Confidence and Demand for Financial Advice

Workers’ confidence about achieving retirement goals has risen sharply since last year according to a new survey from Schwab Retirement Plan Services, and so has their appetite for financial advice. The annual nationwide survey of 401(k) plan participants finds that more than half (53%) say they are very likely to achieve their retirement goals, compared to 37% in 2020. On average, plan participants in 2021 believe they need to save $1.9 million for retirement, the same amount as in 2020. Ninety-one percent say their financial health is very good or pretty good.

Catherine Golladay, Executive Vice President, Workplace Financial Services at Schwab (Photo: Business Wire)

“We experienced tremendous stress in our work and home lives this past year that highlighted the importance of financial wellness and the value of trusted advice,” said Catherine Golladay, head of Schwab Workplace Financial Services. “Now, as we emerge from the pandemic, employers have an opportunity to engage employees with education, advice and a range of other workplace benefits to help them build financial security and increase satisfaction at work.”

In COVID’s Wake, Workers Plan to Save More and Want More Help

Many participants report the pandemic has changed the way they approach saving and spending, with 48% planning to save more in general, 36% planning to increase their 401(k) contribution rate, 35% planning to invest more outside of their 401(k) plan, and 34% planning to pay off debt.

Despite their optimism, many participants also face obstacles to saving for retirement, including market volatility (32%), unexpected expenses (29%), keeping up with monthly expenses (27%), education expenses (21%), and credit card debt (20%). After more than a year of the pandemic, 23% feel they will have to delay retirement due to COVID. Six in ten (61%) think their financial situation warrants professional advice to address these kinds of challenges, compared with half (50%) in 2020.

The top four retirement planning areas where participants want help are calculating a retirement savings goal (44%), receiving advice on how to invest a 401(k) (39%), figuring out how to create income in retirement (35%), and anticipating taxes in retirement (35%). The percentage of survey respondents who are very confident making their own 401(k) investment decisions has increased from 25% in 2019 to 40% in 2021 but still lags those who are very confident in making investment decisions with the help of a financial professional: 44% in 2019 and 56% in 2021.

“Optimism is fueling a recalibration of expectations,” said Golladay. “Workers went back to basics for a year and re-discovered the importance of work-life balance. Do-it-yourself retirement planning was really tested because workers were pressed in other areas. Many have decided that more help is the answer, and they are also looking beyond retirement to other workplace benefits that support financial security.”

Must-Have Benefits

401(k) plans and health insurance again top the list of desired workplace benefits with more than 80% of participants saying these are “must-haves.” Other top-five must-have benefits according to survey respondents are life insurance (50%), disability insurance (43%), and health savings accounts (38%).

Among these other benefits, health savings accounts (HSAs) had the largest increase in respondents who consider them must-haves compared with 2020, growing from 32% to 38%. Eight out of ten survey respondents (79%) have access to an HSA at work, and half (49%) use it. HSAs have been a popular way to pay insurance deductibles and other immediate healthcare expenses, but more participants are also using HSAs to save for healthcare expenses in retirement; 54% in 2021 compared with 41% in 2020.

“It’s good news that plan participants have kept one eye on their future retirement even as they face a challenging present,” said Golladay. “Successful employers will capitalize on this and provide benefits and resources that can help turn today’s optimism and engagement into tomorrow’s financial 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. Survey respondents were actively employed by companies with at least 25 employees, were 401(k) plan participants and were 21-70 years old. For past surveys, respondents were 25 to 70 years old, so for comparing 2021 results to previous waves, the data was rebased on those aged 25 to 70. 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 1 and April 15, 2021. 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.

(0621-1R10)

©2021 Schwab Retirement Plan Services, Inc.

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