August 7, 2024 – Charles Schwab’s latest 401(k) Participant Study, conducted by Logica Research, sheds light on evolving retirement planning trends among American workers. The comprehensive survey, which included responses from 1,000 401(k) participants aged 21 to 70, reveals key insights into retirement confidence, obstacles, and the growing demand for professional financial advice.
Increased Confidence in Retirement Savings Goals
The study finds that workers are more optimistic about achieving their retirement savings goals compared to last year. In 2024, 45% of participants feel “very likely” to meet their retirement savings targets, a slight increase from 43% in 2023. Gen Z remains the most optimistic generation, with 50% confident in their ability to reach their goals, mirroring their sentiment from the previous year. Gen X shows the most significant gain in confidence, highlighting a positive trend among mid-career professionals.
Persistent Retirement Obstacles
Despite growing confidence, workers continue to face significant obstacles in their retirement planning. Inflation and stock market volatility remain the top concerns, although the level of worry has decreased from 2023 to 2024. Other notable challenges include paying off credit card debt, saving for children’s education, and unexpected expenses. These financial hurdles underscore the complex landscape workers navigate to secure a comfortable retirement.
Retirement Age Expectations
The survey reveals little change in the expected retirement age, with the average remaining at 65 years in 2024, slightly younger than 66 years in 2023. Notably, Gen Z participants are the most optimistic about retiring early, aiming to retire at 60 years, while Baby Boomers anticipate working until 68 years. These generational differences reflect varying outlooks and financial preparations for retirement.
Retirement Nest Egg Requirements
Workers continue to believe they need $1.8 million saved for retirement, unchanged from 2023. On average, they expect their retirement savings to last 23 years, aligning with last year’s projections. These figures highlight the substantial financial planning required to ensure a stable retirement.
Enhanced 401(k) Literacy
The study indicates a high level of awareness among participants regarding their 401(k) plans. Most workers know how their 401(k) is performing, understand the types of investments it holds, and feel increasingly confident about selecting suitable investments. This growing 401(k) literacy is crucial for making informed retirement planning decisions.
Rising Demand for Professional Financial Advice
A significant finding from the survey is the increased demand for professional financial advice. In 2024, 61% of participants believe their financial situation warrants professional guidance, up from 55% in 2023. Millennials and Gen X, in particular, show the highest demand for expert advice, reflecting their recognition of the complexities involved in retirement planning.
Confidence Boost from Professional Advice
The study underscores the value of professional financial advice in boosting confidence in investment decisions. Workers’ confidence in making 401(k) investment choices nearly doubles with professional assistance, with 55% feeling “very confident” compared to 29% who feel confident on their own. This significant increase highlights the critical role of financial advisors in retirement planning.
Preference for Human Financial Advisors
When it comes to financial advice, workers overwhelmingly prefer human advisors over computer-generated recommendations. Across all generations, participants are more likely to follow advice from a human professional, with Millennials and Gen Z showing a strong inclination towards personalized guidance.
Areas Where Workers Seek Advice
Workers express a strong desire for help in specific areas of retirement planning. Top areas include calculating how much money is needed for retirement, receiving advice on 401(k) investments, creating an income stream in retirement, determining the optimal retirement age, and anticipating tax expenses. This demand for targeted advice underscores the need for comprehensive financial planning support.
Shifting Sources of Retirement Income
The survey reveals that workers increasingly expect their 401(k) to be their primary source of retirement income, with Social Security playing a diminishing role. Those closer to retirement rely more on Social Security compared to younger workers, who anticipate a more diversified income stream, including savings, investments, and part-time work.
Methodology
The 2024 Schwab 401(k) Participant Study was conducted online from April 17 to May 3, 2024, and included 1,000 participants working for companies with 25 or more employees that offer 401(k) plans. An additional 100 Gen Z participants aged 21 to 27 were surveyed to provide a comprehensive generational analysis.
Conclusion
Schwab’s 2024 401(k) Participant Study offers valuable insights into the evolving landscape of retirement planning. With increased confidence in achieving retirement goals, a rising demand for professional advice, and a strong preference for human financial advisors, American workers are actively seeking ways to navigate the complexities of securing a comfortable retirement. As financial challenges persist, targeted guidance and comprehensive planning will be essential in helping workers achieve their retirement aspirations.
