Workers Need Help on Retirement Income

Roughly 33% of retirement plan participants are not sure how long their retirement savings will last, according to Charles Schwab’s “2020 401(k) Participant Survey” of 1,000 currently employed 401(k) plan participants. This uncertainty jumps to 40% for women, compared with only 25% of men.

Survey participants said they expect 44% of their retirement paycheck will come from a 401(k). In 2019, participants increased their contributions to their 401(k) by 20% compared with 2018, to an average of $10,562, and 26% said they contributed the maximum amount allowed by the IRS in 2019.

After their 401(k), survey participants said they think 17% of their retirement income will come from Social Security, 15% from savings and investments, 10% from a pension and 4% from part-time work. Many are using accounts outside the workplace to save for retirement, with 57% using a savings account, 48% an individual retirement account (IRA) and 38% a brokerage account.

Seventy-seven percent of those surveyed are offered a health savings account (HSA), and 45% use it. Many are using their HSA for current health costs, but 41% are using it to save for health care costs in retirement. Last year, 33% contributed enough to their HSA to cover their immediate needs and also set aside money for retirement.

Those who have worked with a financial professional are more confident about making investment decisions, with 49% saying they would be very confident with help from an adviser, compared with just 32% who said they would be comfortable on their own.

Half of workers do not think their financial situation warrants advice, but the other half said they think they need advice.

Those interested in getting financial advice say they would like help with: planning for retirement (39%), figuring out tax expenses (34%), knowing when is the best age at which to retire (33%), creating a retirement income stream (33%) and knowing how to invest their 401(k) balance (32%).

Sixty-eight percent gave an estimate of how long their retirement savings will last, with the average being 24 years.

And, on average, participants plan to retire at age 65, and they think the figure necessary to do so is $1.9 million.

“Every step of the way, retirement planning is a constant balance between saving and spending,” says Catherine Golladay, executive vice president and head of workplace financial services at Charles Schwab. “In the years before retirement, we have to meet our day-to-day financial commitments while still keeping an eye on our long-term savings goals. Once we get to retirement, we want to be able to enjoy our hard-earned savings, but also make them last, likely over a period of decades. Talking to a financial professional can provide important clarity regardless of where you are on that journey. You want every dollar working as hard as possible for you when it comes to retirement savings.”