Data and Research September 21, 2020

Workers Unsure How to Create Retirement Income From Savings

Retirement savers want help with figuring out tax expenses, knowing when is the best age at which to retire, creating a retirement income stream and knowing how to invest their 401(k) balance.

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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.

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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.”

Benefits September 21, 2020

COVID-19 Is Prompting More People to Review Workplace Benefits

More than half plan to make changes during open enrollment, according to Voya Financial.

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The majority of working Americans will be looking to their workplace benefits for health and wealth support as a result of COVID-19, especially as they prepare for open enrollment in the midst of a pandemic, Voya Financial found in a survey.

Eighty-four percent of workers said they think their core benefits—medical, vision and dental—can sufficiently cover unplanned medical expenses. However, 71% plan to spend more time reviewing voluntary benefits than they did in their last enrollment period, and 53% plan to make changes to their benefits coverage.

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“With COVID-19 part of our daily lives for the foreseeable future, our new survey reveals that many are focused on ways that they can protect the health and wealth of themselves and their families, and they recognize workplace benefits are a way to do just that,” says Rob Grubka, president of employee benefits at Voya Financial. “As a result, this upcoming open enrollment season, which typically occurs in the fall for millions of Americans, presents an opportunity for individuals to rethink and re-evaluate previously untapped benefits offered by their employer. This is not the year for employees to hit the ‘default button’ on their workplace benefits, and I find it encouraging to see that more working Americans plan to take positive steps during their next open enrollment period.”

Asked how they could better manage their current health needs, 38% of those surveyed pointed to health savings accounts (HSAs) and flexible savings accounts (FSAs). That was followed by 35% of employees selecting supplemental health benefits, such as hospital indemnity insurance, critical illness insurance or short-term and long-term disability income insurance.

Generation Z was the generation wanting the most additional information (82%) about benefits. This was true for 79% of Millennials, 77% of Generation X and 70% of Baby Boomers.

Eighty-three percent of members of Gen Z said they plan to spend more time reviewing their workplace benefits, while this is the case for 72% of Millennials, 71% of Gen X and 63% of Boomers.

Seventy-four percent of those in Gen Z plan to make changes to their benefits, compared with 60% of Millennials, 53% of Gen X and 28% of Boomers.

“As the youngest and newest workers, it makes sense that Gen Z would be most engaged on benefits, as they have had the least amount of time in the workforce, less familiarity with employee benefits options and limited experience making employee benefit decisions compared to their older colleagues,” Grubka adds. “The pandemic has presented employers with a unique opportunity to help educate Gen Z about the value of workplace benefits early in their careers, during a time when, historically, individuals tend to be less concerned with their health and financial wellness needs.”

Voya says sponsors should encourage their workers to follow through on their selections, as 49% of survey respondents said they would rather plan a home improvement project or review their home cable and internet options than make a benefits change.

Nonetheless, 49% of respondents said becoming more financially secure is their top priority as life eventually goes back to normal.

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