For more stories like this, sign up for the PLANADVISERdash daily newsletter.
Data & Research July 25, 2024
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.
Reported by Natalie Lin
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.
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.