COVID-19 drives engagement levels; Two in five
401(k) participants make changes to their accounts
Anxiety about long-term retirement savings is up according to a
new survey from Schwab Retirement Plan Services, and so is
participant engagement. The nationwide survey of 1,000 currently
employed 401(k) plan participants finds that saving enough for a
comfortable retirement continues to be their leading source of
significant financial stress. On average, these 401(k) participants
believe they need to save $1.9 million for retirement, an increase
of 12% from the $1.7 million reported in last year’s survey. Two in
five participants also say they made a change to their 401(k)
account due to COVID-19, citing rebalancing and increasing
contribution rates as the most common changes.
“Saving for retirement has been a top financial stressor for
people even when the markets were setting records and we were
living through the longest bull market in history,” said Catherine
Golladay, executive vice president and head of Workplace Financial
Services at Charles Schwab & Co., Inc. “Now we are in a new
reality where people are trying to navigate the health and
financial challenges right in front of them, while also worrying
about their long-term goals. It is a lot, and we know workers can
benefit if they talk to a financial professional to help them work
out the right steps for their situation.”
Professional financial help: Catalyst for increased
participant action
Forty-one percent of those responding to the survey have made
changes to their 401(k) as a direct result of COVID-19 and its
economic impact. The top action steps taken by these individuals
were a combination of defensive and potentially opportunistic
moves. Of the 41% who acted, 14% rebalanced their portfolio and 12%
increased their contribution rate. These individuals also indicated
that they either increased (8%) or decreased (7%) their exposure to
stock funds/equity.
Notably, there was a higher rate of action among the one in four
(25%) of survey respondents who consulted a financial professional.
Of those who sought guidance, 67% made changes in their 401(k). The
top three actions steps were the same as the broader group but at a
higher rate: rebalancing (26%), increasing the contribution rate
(22%) and increasing exposure to stock funds/equity (17%).
“We are very encouraged to see so many 401(k) participants
actively engaging with their retirement accounts during this
uncertain time,” said Golladay. “Getting help and leveraging the
financial planning tools and resources your company makes available
can help you understand whether you are on track, or need to make
adjustments to meet your long-term retirement goals, despite the
challenges of the current environment.”
Survey respondents anticipate COVID-19 will have an impact on
their retirement savings. Thirty-seven percent feel they are ‘very
likely’ to achieve their retirement savings goals, nearly half
(49%) report they are ‘somewhat likely’ to achieve their retirement
savings goals and 14% say it is ‘not likely’ that they will achieve
their goals. One in five (21%) expects to retire later than
originally planned because of the current situation.
Other survey findings
- More than three quarters (77%) of survey respondents are also
offered Health Savings Accounts by their employer. Almost half
(45%) of participants use an HSA, and, of those, 13% have used it
to cover COVID-19-related expenses this year.
- The average amount survey participants believe they need to
save for a comfortable retirement is $1.9 million. The average
differs slightly by generation. Millennials and Gen X believe they
will need $2 million and Boomers say they will need $1.6
million.
- Across the generations, Gen X has the lowest confidence about
reaching their retirement goals. Only one in three (32%) of Gen X
survey participants feel it is ‘very likely’ they will reach their
goals versus 42% of Millennials and 39% of Boomers.
- Millennials in the study were the most likely to increase their
401(k) contribution rate and their exposure to equities in the
current environment, followed by Gen X and then Boomers.
“Participants across all age groups expect their 401(k) savings
to be the leading source of their retirement income, and overall
concerns about saving enough and job security are significantly
higher this year than we have seen in previous years,” said
Golladay. “As the country works to emerge from the COVID-19 crisis,
we can expect that the mindset and confidence levels of 401(k)
savers will fluctuate. Professional financial guidance will
continue to play an important role in helping steady their course
ahead.”
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.
(0720-0G0V)
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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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