Many 401(k) plan participants say they would use free retirement advice if it were offered by an employer, but only a small number of them actually do so, according to a Charles Schwab report issued Wednesday.
One part of the report — an online survey of 1,005 participants in 401(k) plans, who aren’t necessarily Schwab clients — found that 55% said they would use free personalized advice if it were offered by their employers. However, another part of the report — a review of data from Schwab 401(k) clients at 911 plans with a combined 755,000 participants — showed that only about 10% of those with access to free advice actually used it, Steve Anderson, head of Charles Schwab Retirement Services, said in an interview.
Mr. Anderson said 74% of Schwab’s 401(k) plan clients offer participants access to investment advice, up from 42% in 2005.
Among reasons cited in the online survey for not using professional advice, 27% said they get advice outside the workplace; 26% said they have more immediate financial concerns; 23% don’t think they’ve saved enough money to justify seeking help; and 49% want to save more than $100,000 before seeking advice, according to a Schwab news release.
“A lot of work needs to be done (by employers to) increase the level of engagement” with participants so these employees will seek professional financial retirement advice, Mr. Anderson said.
Seventy percent of respondents in the online survey say their 401(k) is their “only or primary source of retirement savings,” the news release said. “However, participation in a 401(k) is not enough to guarantee peace of mind (because) 47% of 401(k) participants surveyed feel very confident when it comes to making investment decisions, and 53% say they find retirement benefits even more confusing than health-care benefits.”
Also, 62% in the online survey said they would seek advice “as they approach retirement,” or eight to 10 years before they retire. “That’s almost too late to make a significant difference,” Mr. Anderson said.
Among those in the online survey who received advice in the last two years, 52% expressed confidence in making investment decisions, compared to 35% of those who said they wanted advice but hadn’t received any, he said.
The online survey was conducted June 9-17.