retirement readiness

What’s Your 401(k) I.Q?

More Than Two-Thirds of Americans Fail Fisher’s 401(k) Wellness in the Workplace Survey

Study also suggests a confidence and satisfaction gap

CAMAS, Wash., December 14, 2016 /PRNewswire/ — A startling knowledge gap exists among Americans when it comes to the 401(k) plans offered by their employer, according to a new 401(k) survey released by Fisher Investments 401(k) Solutions.

While most people may think they understand their 401(k), 71 percent of respondents failed Fisher’s 401(k) IQ in the Workplace Quiz, missing at least three of the nine basic questions.

Most Americans (88%) understand topics like 401(k) matching, but they struggled on the quiz when asked about additional topics that are critical to making 401(k) decisions. For example, only 24 percent of respondents could define a mutual fund and only 43 percent knew the percentage of their salary they should save for a comfortable retirement.

“These results point to a larger issue that I see regularly with clients,” said Nathan Fisher, Managing Director and head of Fisher Investments 401(k) Solutions. “People tend to understand the big picture value of 401(k) plans, but when you start to get more specific they quickly struggle, which is a huge problem. If you don’t have a complete understanding of your 401(k) you might not select the best investments for your unique retirement needs. If you are not confident in your ability to pick investments, you might not save enough.”

This sentiment was reflected in the data: while 4 out of 5 Americans say they prefer to work for companies that offer a 401(k) plan, a majority (66%) are not confident in choosing 401(k) investment options. Moreover, one in four Americans claim they were not involved or can’t recall how they picked their 401(k) assets, and over 40 percent are not confident that they will reach their retirement goals.

“Support is the key to addressing these gaps. I find it startling that half of the respondents in our survey said that they do not currently receive any one-on-one help from their 401(k) provider, but an overwhelming majority wished they did.” Fisher continued, “Unfortunately, it can be easy for employers to get hung up on evaluating providers based only on fees and/or costs. While this is an important factor, criteria like support are equally important and can have a direct and lasting impact on your employees’ financial future.”

Employees at small businesses (those with between 5-200 employees) tend to be even less confident about their 401(k). This group had a larger fail rate in the Fisher’s 401(k) IQ in the Workplace Quiz, with nearly four out of five respondents failing. This group was also more likely to say that their provider does not make them feel in control of their financial future and that they wish their 401(k) plan was easier to understand.

People tend to understand the big picture value of 401(k) plans.

“Small businesses owners want to provide the best possible benefits to their employees, but they often lack the time or resources to assess benefits like 401(k) plans,” concluded Fisher. “However, it doesn’t have to be daunting. This survey can provide a roadmap for small business owners to evaluate and select 401(k) plans that will help address the gaps.”

Additional findings from the survey include:

  • Americans don’t trust their 401(k) providers: Trust is an important aspect of retirement planning – both trusting your employer and your advisers. Unfortunately, the survey found one out of four Americans does not trust their 401(k) provider. Interestingly, a third of respondents said that they look to friends or family members for information and guidance on 401(k)s. This number was much higher among millennials, with 41 percent saying they look to friends and family members for information.
  • Women are less confident when it comes to 401(k)s: Though academic and industry research shows women tend to make more thoughtful investment decisions, when it comes to monitoring the progress of 401(k) accounts, only 1 in 5 women make it a priority. Moreover, women were less likely to say they know how to pick investments in their 401(k)s.

 

 

About Fisher’s 401(k) Wellness in the Workplace Survey
Fisher’s 401(k) Wellness in the Workplace Survey was conducted by KRC Research, on behalf of Fisher Investments, to explore 401(k) plan knowledge, information access and service satisfaction in employees working for small, medium and large businesses. The survey also included a nine question 401(k) IQ in the Workplace Quiz, to test basic 401(k) knowledge.
KRC Research surveyed 1,013 American employees working for companies that offer 401(k) plans. Research was conducted via 10 minute online survey from October 7-11, 2016 amongst respondents from an even mix of demographics and company sizes.
About Fisher Investments
Fisher Investments 401(k) Solutions is dedicated to bringing superior retirement plan services to small and mid-sized businesses and their employees. Fisher’s unique service offering is built on 35+ years of successful wealth management experience and includes our flexible investing platform with actively-managed funds. Business owners will experience the benefit of ongoing support from a dedicated Retirement Counselor whose focus is making the management of a 401(k) retirement plan easier, while helping employees plan for a comfortable retirement. For more information, visit here.