Americans, left to manage their own retirement plan investments, are understandably anxious about saving enough for a comfortable retirement. Now, new research confirms that the need for personalized, professional 401(k) guidance has never been greater.
As pension plans over the years gave way to 401(k)s, and with Social Security’s sustainability in doubt, workers today expect 43% of retirement income will come from 401(k)s, up from 40% last year, the 2024 Schwab 401(k) Participant Study found.
Schwab also found 61% of retirement savers believe their financial situations warrant professional advice, compared with 55% last year. In addition, 55% of participants said they’d feel “very confident” about meeting their savings goals if they had help from an advisor, up from 49% last year.
Just this week, Morningstar shared research that found participation in employer-sponsored retirement plans “significantly improves retirement outcomes” while “workers without access to these plans are much more likely to experience shortfalls.”
The challenge remains that most Americans don’t have the time, expertise or confidence to make critical investment decisions. As our country strives to avert a retirement crisis, we should make every possible tool and resource available to workers.
To be sure, 401(k) plan providers already offer a range of tools and services designed to offer guidance. Schwab’s study revealed 39% of participants are most likely to seek guidance from their 401(k) provider, while 35% say they would prefer to consult their own, outside financial advisor for help.
Many top plan providers offer a range of in-plan guidance solutions, including target-date funds (TDFs) and separately managed accounts. Still, as personal balance sheets grow larger and more complex, the need for ongoing, personalized advice increases.
A number of studies show that financial advisors can generate up to 4% higher annual net returns – aided by coaching, portfolio management, tax strategies – versus self-managed accounts. Enhanced portfolio outcomes is largely the reason why roughly four in 10 Americans have hired a financial advisor. The ranks of advised households surge to 70% when they have more than $1 million in investable assets.
Twelve years ago, I co-founded Pontera with the mission of helping Americans retire better. Our secure technology lets workers get professional 401(k) management from their trusted advisor, who now can deliver holistic advice that encompasses all, not just some, of their client’s holdings.
The latest research only reinforces what we’ve said for years: Financial advisors offer a critical solution to helping millions of US workers get the most out of their earnings.
The good news is that the technology consumers need to connect advisors with their 401(k)s is already available. The financial services industry can give retirement savers what they want, and need, by enabling more advisors to manage their client's workplace retirement accounts.
