Workers Expect 401(k) to be Main Source of Retirement Income

Charles Schwab surveying also found less optimism in Social Security, while separate polling by J.P. Morgan saw more 401(k) confidence from those working with an adviser.

401(k)s continue to dominate U.S. workers’ retirement income plans, but adviser assistance may improve their confidence in managing the drawdown, according to new surveys from Charles Schwab and J.P. Morgan Asset Management.

Employees anticipate that their 401(k) will become their main source of retirement income in the future, with Social Security benefits becoming less reliable, according to the “2024 401(k) Participant Study” released by Schwab on Wednesday.

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Respondents expected 43% of their retirement income to come from a 401(k), compared with 40% last year. Meanwhile, of respondents expected Social Security to make up 16% of their retirement income on average, down from 20% who said the same last year. Additionally, workers who are at least 11 years from retirement are much less likely to rely on Social Security than workers within 10 years from retirement.

The survey asked respondents to think about the different sources of income for their retirement and what percentage they expect to come from each source listed:

Retirement Income Sources

Within 10 years from retirement

Within 11 or more years from retirement

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

37%

45%

Social Security

22%

13%

Savings and investments

15%

13%

Pension/Defined benefit plans

11%

9%

Part-time work

4%

4%

Annuities/Insurance

3%

3%

Inheritance

3%

3%

Company stock plan/Equity compensation

2%

4%

Real estate income

2%

3%

Other

1%

3%

While attitudes toward retirement income sources differ depending on an individual’s years from retirement, 401(k)s remain the most relied on. Additionally, workers were most likely to say they seek advice directly through their 401(k) plan.

“As confidence and 401(k) knowledge have improved, workers’ appetite for financial advice has increased as well,” Schwab researchers wrote in the report.

How Professional Advice Can Help

In a separate survey released Thursday by J.P. Morgan Asset Management, 61% of retirement plan participants believe that seeking professional counsel is necessary, given their financial circumstances, compared to 55% from last year.

J.P. Morgan’s report, “2024 Defined Contribution (DC) Plan Participant Survey Findings,” found that employees are more likely to feel extremely confident in their ability to choose 401(k) investments wisely if they have the assistance of a financial professional (55%, up from 49% in 2023) than they are if they choose to take the independent route (29%, up from 27%).

The need for advice is real, the report stated, as a stable retirement income stream is a concern for 77% of participants; meanwhile, less than half have estimated their savings requirements.

Plan options that offer guaranteed retirement income piqued the interest of 90% of participants. Additionally, participants’ desire to increase their contributions to retirement plans was strongly influenced by guaranteed income, J.P. Morgan found.

J.P. Morgan’s survey was conducted in in January among 1,503 DC plan participants employed full-time at a for-profit organization with at least 50 employees.

Schwab’s online survey of 1,000 U.S. 401(k) plan participants was conducted between April 17 and May 3. Survey respondents were actively employed by companies with at least 25 employees.

Product & Service Launches – 7/25/24

Interactive Brokers adds retirement planner to portfolio analysis platform; Paychex PEP offering tops $1B in assets; vWise offers AI-generated video creation for participants; and more.

Interactive Brokers Adds Retirement Planner

Interactive Brokers LLC, an electronic broker, has debuted a free retirement planner.

The retirement planner has been added to the firm’s PortfolioAnalyst dashboard, an offering for individual investors, financial advisers and brokers to oversee investment portfolios and consolidate finances across multiple brokerage and other accounts at more than 15,000 financial institutions. The dashboard consolidates investments such as annuities, mortgages and student loan accounts.

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The retirement planner is designed to “help investors review their preparedness for retirement and set financial goals. It determines if cash flow is sufficient for retirement by allowing investors to input and tailor data across their accounts and other financial holdings and assets,” according to the announcement.

Paychex’s 401(k) Services Pass $51 Billion in Assets

Payroll and employee benefits provider Paychex Inc.’s 401(k) client services have grown to more than 120,000 employers and more than $51 billion in assets under administration through May 31.

The firm also announced that its pooled employer plan, launched in 2021, now includes 34,000 adopting employers representing more than $1 billion in plan assets.

“In the midst of a retirement savings crisis in America, we believe it is our purpose to help small- and mid-sized business owners offer an affordable retirement solution for their employees,” said John Gibson, Paychex’s president and CEO, in a statement. “We continue to provide robust retirement products and services, financial adviser and accountant partnership programs, and advocacy in the nation’s capitol, because we acknowledge every American’s right to feel secure in their retirement.”

Paychex 401(k) clients have full integration with its other services, including payroll, insurance and other employee benefit services. For its adopting PEP clients, Paychex acts as both plan sponsor and plan administrator, “reducing employers’ fiduciary and administrative burdens,” according to the firm.

vWise Releases New AI Video Hosts for its Participant Engagement Platform

 vWise Inc., a technology firm operating in the retirement industry, announced an artificial intelligence-generated video service to be used for participant education, enrollment and communication of services.

The AI-generated video hosts are now available on vWise’s participant engagement platform that, with input from the client,  should reduce the time to create and roll out messaging and calls to action.

“With AI, employee engagement, education and enrollment into your managed account and retirement income products just took a big step forward,” said vWise CEO David Ferrigno in a statement. “These new capabilities streamline video production and versioning, enabling recordkeepers, advisors and asset managers to do more—much more—with fewer resources and in less time. Our new tools condense hundreds of hours of casting, production and editing into just a few dozen.”

Milliman Adds Hueler Guaranteed Income Option

Consulting and benefits administration firm Milliman Inc. is now offering a Hueler guaranteed lifetime income option for 401(k) recordkeeping clients.

The Hueler Income Solutions’ Think Income program will give plan sponsors the chance to provide their participants with access to a lifetime income annuity marketplace at institutional prices, along with educational tools to guide them. Hueler Income Solutions also provides customer service for questions and assistance with purchasing.

“People nearing retirement face the challenge of ensuring their savings will last throughout their lifetime,” said Kari Jakobe, a principal at Milliman and its defined contribution practice leader, in a statement. “Our approach is to offer solutions in our financial wellness suite that help our clients address participants’ various financial objectives, whether it’s investment vehicles with a targeted lifetime income stream, in-plan annuity products, or an out-of-plan annuity marketplace that provides insurance-guaranteed lifetime income.”

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