401(k) Participants More Likely to Use Advisers than 403(b) Participants

Contrastingly, slightly less than half (42%) of 403(b) participants use a financial adviser. According to the study, most participants use their adviser for plan investment decisions, and a smaller proportion also use the adviser to provide financial planning and guidance.

The method of meeting an adviser was also different among 401(k) and 403(b) participants. According to the study, among 401(k) participants, the most frequently cited source (38%) was a referral from a friend or business associate (compared with 27% of 403(b) participants). 403(b) participants most often said they met their adviser through their retirement plan provider (33%).

Adviser relationships among both types of defined contribution participants often develop into long-term relationships. Two-thirds of all participants have been working with their adviser for three years or more, according to the research. 401(k) participants are more likely to have purchased investments based on their adviser recommendation within the past year (61%, compared to 46% of 403(b) participants).

Other Differences

401(k) participants also accumulate more than 403(b) participants, which the study says could have something to do with lower savings rates, fewer employer match contributions, and conservative investing habits. Less than half (38%) of participants in 403(b) plans contribute 6% or more of their salaries to their retirement plans, compared with 48% of private-sector 401(k) participants. Furthermore, 401(k) participants are twice as likely to do catch-up contributions when eligible.

While 74% of 401(k) participants receive an employer match, only 57% of 403(b) participants receive do, the study found. Also, 403(b) participants tend to be more conservative investors than 401(k) participants: 52% of 403(b) participants describe their plan investment strategy as very or somewhat conservative compared to 43% of 401(k) participants.

403(b) participants are also less likely to have any of their investments in target-date or lifestyle funds. Stable value funds are the most widely used; 56% of 403(b) participants invest all or some of their balances in them.

The above differences might explain why 403(b) participant balances are smaller: 36% of 403(b) participants report a retirement plan balance of $50,000 or more, compared to 39% of 401(k) participants. More 403(b) participants have an account balance less than $10,000 than 401(k) participants (38% and 33%, respectively), according to the study.

Spectrum Group surveyed 205 participants in 401(k) plans and 196 participants in 403(b) plans. The income distribution was relatively the same, but the large demographic difference is that participants in 403(b) plans are more likely to be female and to have an advanced degree.