Demand for advice rises as 401(k) investors grow more bullish on professional help

Workers are feeling more confident about their ability to reach their financial goals for retirement as anxiety around inflation and market volatility has come down since last year, according to a new survey from Charles Schwab. The annual nationwide survey of 401(k) plan participants finds that 43% of workers think they are very likely to achieve their retirement savings goals compared to 37% in 2023.

Inflation and stock market volatility continue to be the biggest obstacles to saving for a comfortable retirement, though workers are slightly less concerned about both factors in 2024.

Top obstacles to saving for a comfortable retirement

2023

2024

Inflation

62%

58%

Market volatility

42%

36%

Workers still think they need to save $1.8 million for retirement, the same as last year, and on average, they expect their nest egg to last 23 years after retiring at age 65.

“Workers are feeling more optimistic about their retirement prospects and an improving economic climate tends to boost financial confidence, but it’s not the only factor,” said Lee McAdoo, Managing Director of Schwab Retirement Plan Services. “We’re seeing heightened awareness around 401(k) investments and performance – a promising sign that workers are actively engaging with their accounts and cultivating knowledge to help them reach their goals.”

Only 8% of survey respondents say they don’t know what investments are in their 401(k) account, an improvement from 12% in 2023. In addition, more workers say they know what investments to choose for their 401(k) (69% up from 65% in 2023) and 92% know how their 401(k) is performing.

Workers: I get by with a little help from my friends

As confidence and 401(k) knowledge have improved, workers’ appetite for financial advice has increased as well.

Sixty-one percent feel their financial situation warrants advice from a professional, higher than last year (55%). Plus, more workers would be very confident in making the right 401(k) investment decisions with the help of a financial professional (55%, up from 49%), than they would making those decisions on their own (29%, up from 27%).

Workers are most likely to say they seek advice directly through their 401(k) plan (39%), followed closely by their financial advisor (35%), family and friends (27%), and their employer (25%). Sixty-one percent are comfortable asking artificial intelligence tools like ChatGPT for help with financial planning, up from 49% in 2023. Still, more say they are very likely to follow human professional advice recommendations (60%) rather than computer-generated recommendations (19%).

“Improved 401(k) confidence is not necessarily an indicator that workers are comfortable going it alone,” said Marci Stewart, Director of Client Experience at Schwab Workplace Financial Services. “In fact, they are realizing that professional help has the potential to further accelerate their progress. Self-guided education and computer-generated advice can provide solid financial wellness support, and a human professional can validate your plan and make more tailored recommendations, which can be invaluable for feeling more confident and financially secure in the long term.”

The emerging retirement challenge: solving the income puzzle

The survey finds that more workers would like help with creating an income stream in retirement — a possible symptom of waning confidence in Social Security.

Overall, respondents expect 43% of their retirement income to come from a 401(k), up from 40% last year. They expect Social Security to make up 16% of their retirement income on average, down from 20% last year. Workers who are within 10 years of retirement expect to rely much more on Social Security than those further from retirement. Those who will still be working for at least 11 more years expect to rely more on their 401(k) than those closer to retirement.

Expected percentage of retirement income by source

Within 10 years of retirement

11 or more years from retirement

401(k) (participant’s and spouse/partner’s 401(k))

37%

45%

Social Security

22%

13%

Additional sources (e.g., investments, defined benefit plans, company stock plans, part-time work)

41%

42%

Workers who are closer to retirement also have focused on investing outside their 401(k) through individual retirement accounts and brokerage accounts significantly more than those who are further from retirement. Savings accounts are popular among all workers, and a significant share of workers are using health savings accounts and company stock plans to save for retirement, too.

“Uncertainty about the future of Social Security means employers will play an increasingly important role in helping workers develop a retirement income stream not only through their 401(k), but also through other workplace financial benefits that can include health savings accounts, company stock plans and traditional pension plans,” said Stewart.

About the survey

This online survey of 1,000 U.S. 401(k) plan participants was conducted by Logica Research between April 17 and May 3, 2024. Survey respondents were actively employed by companies with at least 25 employees, were 401(k) plan participants and were 21-70 years old. Survey respondents include participants served by approximately 15 different retirement plan providers. All data is self-reported by study participants and is not verified or validated. 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 www.aboutschwab.com. Follow us on X, Facebook, YouTube and LinkedIn.

Disclosures

Workplace Financial Services is a business enterprise which offers products and services through Schwab Retirement Plan Services, Inc.; Schwab Stock Plan Services; and Designated Brokerage Services. 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. Schwab Designated Brokerage Services (DBS), a division of Charles Schwab & Co., Inc., provides technology solutions for corporate clients with regulatory requirements to monitor employee security transactions. Schwab Retirement Plan Services, Inc., and Charles Schwab & Co., Inc. (“Schwab”) (Member SIPC) are separate but affiliated entities, and each is a subsidiary of The Charles Schwab Corporation.

0724-C23D

Mike Peterson Charles Schwab 330-908-4334 mike.peterson@schwab.com

Carly Taylor The Neibart Group 973-618-6993 SchwabRPS@neibartgroup.com

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