24% of Participants May Cut 401(k) Contributions

Nationwide Retirement Institute recommends that advisers and recordkeepers work to help participants maintain their financial futures.


High cost of living and fears of a recession may be driving consumers to make bad decisions with their workplace retirement savings plans and finances in general, according to a new study from Nationwide Mutual Insurance Co.’s retirement institute.

To offset inflation, 37% of respondents are considering increasing their credit card debt to stay afloat; 24% are thinking about reducing their retirement plan contributions; 21% are considering taking or have already taken out a loan, according to a multiple response question in an April survey of 2,000 adult consumers conducted by the Nationwide Retirement Institute.

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Meanwhile, 57% of consumers have tapped into savings in the past 12 months to pay for everyday expenses, with Gen Z (born from 1997 through 2012) and Millennial (1981 through 1996) consumers doing so at the highest rates, 64% and 66%, respectively, according to the report.

These short-term tactics may erode the financial future for many consumers, who may not realize the resources and help available to them through workplace retirement plans, says Kristi Martin Rodriguez, senior vice president of the Nationwide Retirement Institute.

“Part of the problem is that participants tend to think of their 401(k) plan as a merely a savings vehicle,” Rodriguez says. “The truth is, it’s likely their plan offers more than just a means of accumulating savings. In many cases, plans offer free advice and planning tools and, in some cases, a means for turning their savings into a predictable stream of income in retirement.”

Rodriguez, who led the study for Columbus, Ohio-based Nationwide, says a good recordkeeper will be communicating with participants about financial education and tools available to them. Meanwhile, retirement plan advisers can work with the plan sponsor and participants on how to leverage these tools.

“Advisers can complement their own tools and resources with those offered by the plan’s recordkeeper to support participants with their day-to-day planning needs,” she says. “They can also partner with the recordkeeper and plan sponsor to develop a comprehensive strategy for creating visibility of these resources among employees and participants.”

Recession Concerns

Consumers may be acting cautiously with their money due to fears of a financial pinch in the near future, according to the survey findings. Of those surveyed, 68% expect a recession within the next six months, and nearly 80% of those expect it to be severe.

Due in part to this fear, positive consumer sentiment about the economy has fallen to only 16% of consumers, according to Nationwide, down from 24% last year. That decline in sentiment is matched by a drop in consumers citing positive feelings toward their own personal finances, which clocked in at 39% of those surveyed, down from 47% last year.

In the event of a recession, most consumers showed concern about their retirement saving and outcomes. According to a multiple response question from Nationwide, 52% of consumers were worried about their ability to save for retirement, 52% were worried about their retirement account losing value and 42% have concern about their ability to retire on time if a recession hits.

“It’s not surprising that people are feeling anxious,” Rodriguez says. “It’s important for advisers and financial professionals to understand the emotions their clients are feeling right now as a first step to helping them stay focused on their long-term financial plans.”

Communication is Key

Rodriguez notes that provisions in the SECURE 2.0 Act of 2022 can help bolster retirement savings. She points in particular to the creation of emergency savings vehicles that allow up to $1,000 per year for plan participants who need help covering “unexpected expenses like a car repair or medical bills.” She also calls out the potential for employers to offer a match for participants making payments on student loan debt.

The success of these and other programs, however, relies in part on communicating to participants, according to the retirement institute head.

“A good recordkeeper will bring a strong communications strategy for helping participants understand these resources, but there’s also a huge opportunity for leaders of the company to be more deliberate about encouraging employees to engage with these communications to understand their options,” she says.

Getting people’s attention, however, may continue to be a challenge, according to the survey results. Most consumers, especially of younger generations, are turning to advice from friends and family, online resources, prayer and social media, according to Nationwide.

Only 30% say they are working with a financial adviser, with the other 70% citing cost (46%), not having enough assets to make financial advisement worth it (37%), not knowing who to go to (22%) and not believing they need advice (21%) as reasons why. Meanwhile, about one-third of all respondents (31%) said ChatGPT will provide better financial advice than a human adviser in the next five years, with that percentage at 37% for Gen Z and 43% among Millennials.

Rodriguez says today’s moment of fear can be one for financial professionals to engage with consumers.

“There can be a real temptation for consumers to retreat or even surrender when the financial news cycle seems so challenging,” Rodriguez says. “The first step for advisers is understanding where their clients are coming from by listening with empathy. That can set the stage for a more collaborative conversation about steps to keep them on track.”

Advisers, Participants Skeptical of ESG Investments, but Asset Managers Are Not

Greenwashing by investment funds has contributed to negative rhetoric about ESG, but the practice remains a top initiative for U.S. asset managers, say experts at Cerulli.


Almost half (44%) of U.S. financial advisers said they were hesitant to even address the topic of environment, social and governance investments with clients, while 41% of 401(k) plan participants are unfamiliar with or have never heard of ESG investing, according to new research from consultancy Cerulli Associates.

“In the broader retail investor sphere, this combination of lack of familiarity and often agenda-driven negative rhetoric makes the ESG space a ‘third rail’ for many advisers,” Cerulli stated in a research report released Tuesday. That sentiment stems in part from investment funds increasingly being under scrutiny for “greenwashing,” the practice of intentionally presenting a false impression that a company and/or its products are more environmentally sound than they really are, according to the Boston-based firm.

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While greenwashing has driven a negative investor perception of ESG, Cerulli survey data indicated that a lack of education on the topic is contributing to the confusion.

In spite of these findings, many in the asset management industry, may be embracing ESG investing. In the U.S., 58% of manager respondents considered ESG a top product development initiative. Despite reservations from plan participants and advisers, Cerulli experts expect asset managers to remain dedicated to development, sales and marketing of ESG products.

“Overall, Cerulli’s research reflects an industry largely unswayed by negative rhetoric surrounding the topics and concepts related to ESG investment,” said David Fletcher, associate director of editorial production at Cerulli, in a statement. “By and large, sustainability and the overarching themes of ESG investment are already ingrained in the asset management industry. The challenges firms face in implementing ESG investment initiatives are pain points that will likely be viewed in retrospect as necessary steps in the legitimization and long-term success of these goals.”

ESG-branded investments were almost always (93% of the time) presented as a stand-alone option on a core retirement plan investment menu, rather than as the plan’s qualified default investment alternative, when provided in consultant-intermediated plans, according to the survey. Offering ESG products as stand-alone options on the core lineup for self-directed investors was considered a practical approach to distributing these investments to the defined contribution market.

The majority of U.S. asset managers also support more clearly defined regulation of and guidance on ESG investing. Seventy-three percent said they believe the Securities and Exchange Commission should be responsible for setting standards for public companies’ ESG disclosures. Meanwhile, 58% of respondents said the SEC should be tasked with setting ESG standards and product definitions for asset managers. Several markets in Asia have set more rigorous disclosure norms for funds purporting to be ESG, including Japan, Taiwan and South Korea, according to Cerulli. Some of the new regulations include disclosure of their ESG focus, thematic approaches followed and minimum assets that must be deployed in sustainable investments, as well as other conditions.

Cerulli’s white paper, “Global State of ESG: Forging Ahead Amidst Heightened Regulatory Scrutiny and Investor Skepticism,” draws on responses from asset owners and managers polled during the past year.

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