(Photo: Shutterstock)The COVID-19 pandemic has taught people many lessons – including the importance of financial wellness, according to an online survey of 1,000 US 401(k) participants by Schwab Retirement Plan Services.
“People have been taking a more thoughtful approach reflecting on what is important to them and their family. So many individuals — regardless of how they fared during the pandemic – took the time to think about their finances and their approach to them,” Catherine Golladay, executive vice president and head of Workplace Financial Services at Charles Schwab, tells Benefits Pro.
Now, 48 percent of respondents plan to save more in general, 36 percent plan to increase their 401(k) contribution rate, 35 percent plan to invest more outside of their 401(k) plan and 34 percent plan to pay off debt.
Confidence about retirement goals is up sharply — nearly all (91 percent) of this year’s respondents say their financial health is very good or pretty good, and just over half (53 percent) say they are very likely to achieve their retirement goals, compared to 37 percent in 2020. On average, plan participants in 2021 believe they need to save $1.9 million for retirement, the same amount as in 2020.
“This could be due to being more engaged with the finances and taking a more thoughtful approach,” Golladay says. “We encourage employers to build on this sense of confidence, using tools and education to keep them engaged.”
However, many of the respondents still face savings obstacles, including market volatility (32 percent say this), unexpected expenses (29 percent), keeping up with monthly expenses (27 percent), education expenses (21 percent) and credit card debt (20 percent).
After more than a year of the pandemic, 23 percent feel they will have to delay retirement due to COVID. A majority (61 percent) their financial situation warrants professional advice to address these kinds of challenges, compared with half (50 percent) in 2020.
“This is actually one of the ‘ah ha’ bright spots within the survey results,” she says. “In the past we had many people thinking maybe their situations doesn’t warrant professional 401(k) advice, but your wealth is your wealth. When you have a plan in place, a level of confidence comes with that – regardless of what your starting point is.”
The top four retirement planning areas where participants want help are calculating a retirement savings goal (44 percent), receiving advice on how to invest in a 401(k) plan (39 percent), figuring out how to create income in retirement (35 percent) and anticipating taxes in retirement (35 percent).
More than half (56 percent) of respondents who make investment decisions with the help of a financial professional are very confident, up from 44 percent in 2019. For those who make their 401(k) investment decisions on their own, 40 percent are very confident, compared to just 25 percent in 2019.
Other key survey findings include:
– 401(k) plans and health insurance again top the list of desired workplace benefits, with more than 80 percent of participants saying these are “must-haves.” Other top-five must-have benefits according to respondents are life insurance (50 percent), disability insurance (43 percent) and health savings accounts (38 percent).
– Among these other benefits, HSAs had the largest increase in respondents who consider them must-haves compared with 2020, growing from 32 percent to 38 percent. A majority (79 percent) have access to an HSA at work, and half (49 percent) use it.
– While the most common use for HSAs are to pay insurance deductibles and other immediate health care expenses, more participants are also using the accounts to save for health care expenses in retirement — 54 percent in 2021 compared with 41 percent in 2020.
READ MORE: