More employers offer retirement saving advice, but workers aren’t signing on

September 15, 2010

The numbers of workplace retirement plans providing free investing guidance to employees is rising quickly, but very few workers are taking them up on the offer.

A study by Charles Schwab of more than 900 plans that it manages found that 74 percent offer free investment advice to workers, up from just 42 percent five years ago. But less than 10 percent of plan participants have signed up for the help.

What’s more, a separate national survey of 401(k) investors commissioned by Schwab turned up the surprising finding that many retirement investors think financial advice would only be valuable later in life. Sixty-two percent of respondents said they would wait until they are “approaching retirement” to get advice and 49 percent said they needed to have $100,000 or more saved for retirement before it would be worthwhile to seek out professional advice.

“Unfortunately, many people start focusing on retirement when it’s already too late,” says Catherine Golladay, Schwab’s vice president of education and advice. “Procrastination, distraction or confusion are not effective retirement planning strategies. Advice can help people focus on the right things at the right time”.

Reforms contained in the Pension Protection Act of 2006 encouraged employers to engage financial professionals to provide retirement advice to employees. Often, plans provide that guidance through their third-party plan providers, such as Schwab.

Schwab’s analysis of plan participants found that professional advice produced several significant benefits, including:

–Improved savings rates. Seventy percent of participants who receive 401(k) advice made changes to their contribution rates and the rate of savings nearly doubled, from five percent to 10 percent of pay.
– Greater diversification. Plan participants who received advice had a minimum of eight asset classes in their portfolios, more than double those who didn’t get advice.
– More disciplined investing behavior. Ninety-two percent of advised savers stayed the course in their portfolios through the crash of 2008.

Mark Miller is a journalist and author who writes about trends in retirement and aging. He is the author of The Hard Times Guide to Retirement Security: Practical Strategies for Money, Work and Living and edits RetirementRevised.com.

2 comments

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Employers offering retirement advice? That stinks. It’s like trusting the fox to give useful advice on guarding the hen house. Why would they, and furthermore, why would we listen to them? Employers as companies care nothing about you, me, or anyone else. They care only about the concept of workers, consumers, stockholders, and profits -but not real people. Any advice they fund will surely maintain the attitude that being unemployed and too young to retire is solely the fault of the workers. Deplorable for them to offer advice. They should be offering jobs instead! Who needs their advice. Even if workers saved everything all their life, it still would not be enough to retire on. Disgusting that employers think they can wash their hands of this dirty situation so easily.

Posted by SeaWa | Report as abusive

SeaWa, please take a deep breath. Employers may pay for the investment advisor, but the advisor is independent of the employer and has a fiduciary duty to give you un-biased information. The are supposed to serve you, not the employer. But if “free” still sounds dubious to you, there is nothing stopping you from hiring (and paying) your own investment advisor. Either way, the average employee (if not you) are likely to benefit. Sounds like you got a bum deal somewhere along the way, but don’t let it prevent you from taking advantage of what you can otherwise.

Posted by CitzenDave | Report as abusive

[...] and Exchange-Traded Funds (ETFs). Then, Schwab intends to plow some of the savings into investment advice for workplace retirement savers that would be built into the [...]

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