Data & Research March 31, 2009

Young Adults Want More Financial Advice at Work

The youngest members of the workforce would like more education and guidance about finances at work, according to a survey by Charles Schwab
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Two-thirds of respondents (ages 23 to 28) said they would like to see their employer offer education and guidance about financial topics beyond those related to employee benefits, but only 25% of employers actually do so.

According to a Schwab press release, when it comes to financial education and guidance offered by employers, there is a sizeable gap between what younger workers want and what their employers actually offer. However, almost one in three younger workers (31%) said they are not very familiar or at all familiar with their employers’ offering of financial benefit plans.

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A study recently released by MetLife found that this gap exists across all age groups (see “Study Finds Employer-Worker Disconnect about Advice“).

Half of respondents to Charles Schwab’s survey said they want 401(k) or company-sponsored retirement plan guidance, but only 30% of employers offer it. However, of those individuals who have access to an employer-sponsored retirement plan, 87% say it is an important benefit, but 35% are not contributing to it. Of those who do contribute, more than one-third (35%) are not confident in their ability to make suitable investment choices.

Other fiscal fitness help younger employees want, according to the press release, include:

  • debt management education (30% of employees want it; 8% of employers offer it);
  • advice about investing outside a 401(k) or other workplace retirement plan (30% of employees want it; 7% of employers offer it);
  • budgeting advice (26% of employees want it; 10% of employers offer it);
  • guidance about purchasing a home (22% of employees want it; 5% of employers offer it);
  • counsel about saving for a child’s education (19% employees want it; 4% of employers offer it).

Almost two-thirds of young adults (64%) ranked financial fitness as more important than physical fitness; however, fewer than one in five (18%) consider their own financial physique to be “toned and fit.” More than three in four young adults describe their financial health as either “a little flabby” (55%) or “seriously out of shape” (27%).

Fiscally Prepared

The Schwab survey found 26% of survey respondents said they were most surprised to learn how much money it takes to live independently as they “began to live life on their own.” Only about half (51%) are financially independent from their parents. More than a quarter (26%) still live with their parents, and of those, 28% are unemployed while another 26% made the choice to live with their parents in order to save money.

The majority (56%) of young adults surveyed attribute their knowledge of money management basics to their parents, with 43% continuing to turn to their parents for ongoing financial advice.

Many in this age group admit they do not feel adequately prepared to make good financial choices when it comes to using debt wisely (28%), saving for the future (40%) or investing their money (43%). When asked which aspects of personal finance they wish they had learned more about before entering the workforce, living within a budget (45%), and the importance of saving (42%) were the top responses, Schwab said.

On average, those surveyed carry more than $14,000 in debt (excluding home mortgages). Of those who use credit cards, only one-third (33%) pay off their entire balance every month, while the other two-thirds make payments less reliably. Nearly 10% said they make payments only when they can.

More than one-third of young adults surveyed (36%) said that the single most important action the Obama Administration could take to improve financial literacy in the United States would be to create incentives (or provide additional funding) for states that mandate personal finance in the standard high school curriculum. Another 36% believe the Administration should create economic incentives encouraging employers to provide holistic financial education for their employees, and fund a public awareness campaign for financial literacy to encourage parents to do a better job of teaching their kids money basics.

The 2009 Young Adults & Money survey was conducted by Lieberman Research Worldwide on behalf of Charles Schwab in January. The online survey polled 1,252 young adults.

Data & Research March 31, 2009

Top DC Sponsor Concerns: Safety and Inflation

More than a third of consultants said sponsors are planning to revisit the glide path of target-date funds, according to a survey by PIMCO.
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Sponsors are typically looking to make the glide path more conservative and better diversified, according to a PIMCO news release about its survey results. Furthermore, consultants are helping DC plans offer investment options that focus on minimizing the risk of losses, with 61% expecting plans to add Treasury or government-only money market funds.

In the same vein, according to the news announcement, 61% of consultants said they are helping evaluate DC plans’ existing stable value offerings by studying the underlying manager performance.

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“Given the extreme market volatility and significant decline in DC account balances over the past year, it’s not surprising that DC plan sponsors are focused on reducing the risk that participants face in their DC plans,” said Stacy Schaus, senior vice president and PIMCO’s Defined Contribution Practice leader, in the news release. “Consultants are helping clients evaluate their DC plan investment structures, often to dial down risk and improve the likelihood that the plans will meet participants retirement income goals.”

Inflation Risk

At the same time, though, PIMCO finds that consultants are also working with clients to assess volatility and inflation risk in their plans. They report that plan sponsors are adding asset classes that increase diversification and help hedge against a rising inflationary environment.

All of the consulting firms in the poll agree inflation protection is somewhat important to critical in DC plans, and they ranked Treasury Inflation-Protected Securities (TIPS), commodities, and real estate investment trusts (REITs) as the top three asset classes for doing so, PIMCO said.

Target-Date Growth

Some 35% of consultants note that plan sponsors are reconsidering or revising the asset allocation, or “glide path,” in their target-date offerings. PIMCO said consultants believe target-date strategies will continue to be the preferred investment default for DC plans, and two-thirds of consultants are actively promoting custom target-date strategies.

More than three-quarters (76%) of consultants offer custom target-date asset allocation services for clients, and they support custom strategies for plans of all sizes, from $1.3 million to multi-billions.

Other findings from the survey include:

  • 94% of consultants believe target-date strategies will continue to be the most prevalent form of investment default in DC plans;
  • 78% believe that DC plan sponsors expect to add guaranteed income products over the next two years;
  • 59% of consulting firms have a dedicated DC team, with a median of five consultants, four analysts, and one support person—an increase of one person from 2008.


The 2009 Defined Contribution Consulting Support and Trends Survey covered 32 consulting firms across the U.S. that collectively serve more than 1,400 clients with aggregate DC assets of nearly $1.6 trillion.

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