Schwab 401(k) Survey Finds Savings Goals and Stress Levels on the Rise – Participants Now Believe They Need to Save $1.9 Million for Retirement

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.

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