PLANADVISER - July/August 2019 - 14

Participants Have The Right Mindset,
But " We Still Have Work To Do "
P
articipants in DC plans have formed
realistic expectations of their retirement
challenge and appreciate the digital and
personal retirement and financial coaching
their employers provide, says the 2019
edition of a nationwide survey of 1,000
participants from Schwab Retirement Plan
Services. PLANADVISER recently spoke to
Nathan Voris, Managing Director of Business
Strategy, to assess the survey findings.
PLANADVISER: You've conducted this
survey for ten years. What are the top three
or four insights from this version, and were
there any surprises?
Nathan Voris: One theme that has come
through before, and did again this year, is that
people acknowledge that in a world of 401(k)
plans, saving and investing for retirement is
a personal responsibility. This year, we asked
a new question: how much will you need to
accumulate for adequate retirement income?
The answer was $1.7 million, on average. Two
conclusions come from that-that people
have a sense of what their goals should be,
and that they're making reasonable estimates.
Secondly, it's encouraging that even
when many people are auto-enrolled and
have their contributions set by default, they
are engaged and informed.
Third, participants are going beyond just
listening to what people are telling them
and are seeking solutions over and above
the defaults.
PLANADVISER: What proportion of people
set their own contribution rates, and how
many let the plan do it for them?
Nathan Voris: Just over half of the survey
respondents, 55%, told us they were saving
at a rate that they were comfortable with -
but that doesn't tell us a lot. About a third had
set their contributions to get the full employer
match, and 8% were simply auto-enrolled
PLANADVISER: Did this survey tell you
anything new about participants' use of
plan advice and coaching?
Nathan Voris: Industry-wide, about 85%
said, " I would be comfortable asking for
advice, " but only 52% feel
their situation
warrants financial advice. We believe
everyone can benefit from receiving advice,
and 95% of survey respondents said they
would be confident making 401(k) investment
decisions if they had help from a financial
professional.
Retirement calculators are another
Nathan Voris
" Sponsors can implement
a 'stretch match,' where
instead of matching
employee contributions
dollar for dollar up to 5%
of pay, they match 66%
up to 7.5%. "
and at default rates. Those statistics reveal
that for 45% of people, the behavioral
finance built into defaults will determine their
success in accumulating assets. A thoughtful
plan design around default rates will work in
the participants' and sponsor's favor.
Sponsors can implement a " stretch
match, " where instead of matching employee
contributions dollar for dollar up to 5% of pay,
they match 66% up to 7.5%. That doesn't
cost the employer any more, but it does
encourage participants to save 2.5% more of
their own dollars. These aren't new ideas, but
if you implement them in a way that works, it
can raise participation and saving rates.
option to deliver guidance; however, a
calculator is only as good as the actions it
prompts. Of those who have used a calculator,
71% felt encouraged and wanted to
learn more, and 61% took positive actions
related to their finances, such as increasing
401(k) contributions, changing spending
habits, or accessing online advice.
We've come a long way since 2006 and
the Pension Protection Act, but there is still
basic blocking and tackling to be done - on
saving rates, budgets, and all those things
we know are important. Plan design can
certainly help drive outcomes, but as an
industry, we still have work to do. n
For more information, visit
schwab.com/mas
Source: Schwab Retirement Plan Services, Inc.
401(k) Participant Survey, 2019.
(0819-9P3C) (08/19)
SPONSORED SECTION

http://www.planadviserdigital.com/planadviser/july_august_2019/TrackLink.action?pageName=14&exitLink=https%3A%2F%2Fwww.aboutschwab.com%2Fschwab-401k-participant-study-2019 http://www.planadviserdigital.com/planadviser/july_august_2019/TrackLink.action?pageName=14&exitLink=https%3A%2F%2Fwww.aboutschwab.com%2Fschwab-401k-participant-study-2019 http://www.planadviserdigital.com/planadviser/july_august_2019/TrackLink.action?pageName=14&exitLink=http%3A%2F%2Fschwab.com%2Fmas http://www.planadviserdigital.com/planadviser/july_august_2019/TrackLink.action?pageName=14&exitLink=https%3A%2F%2Fwww.aboutschwab.com%2Fschwab-401k-participant-study-2019

PLANADVISER - July/August 2019

Table of Contents for the Digital Edition of PLANADVISER - July/August 2019