We commissioned a nationwide survey of over 1,000 employees about their knowledge of their company’s 401(k) plan. We found that a significant majority of Americans, around 70%, regularly feel overwhelmed, disappointed, and skeptical about retirement planning. Check out this report to see how the national results compared to yours, gain insights into common misunderstandings, and find out what you can do about it for your company’s 401(k) plan.

Overview

Employees feel overwhelmed by their 401(k) and aren’t confident about reaching their retirement goals

401(k) plans are offered by employers for any number of reasons: to help their employees get retirement ready, to save for their own retirement, to attract and retain top talent—and often all of the above. But are employers getting the benefits they expected by offering a 401(k)? We set out to get answers to this question, along with others: How well do employees understand their 401(k) plan? Do they have confidence in their retirement-readiness? Do they know how to choose their 401(k) investments? Do they value the benefit their employer offers? And above all, what do those answers mean to employers?

We conducted a financial wellness survey that included the 401(k) IQ in the Workplace quiz to explore 401(k) plan knowledge. We surveyed more than 1,000 employees with evenly mixed demographics and company sizes—and the results were fairly consistent, regardless of age, company size, or other discernable factors.*

In our survey, we found that employees are overwhelmed by the management of their 401(k) plan and don’t feel in control of reaching their retirement goals. They often lack the expertise to make investment selections and wish they had more 401(k) guidance and support. Therefore, employees are skeptical of the value a 401(k) offers them.

What’s the impact if employees don’t understand or value their 401(k)?

  • Employee participation rates and deferral rates can be low—which might cause regulatory issues with “top-heavy” plans, and therefore a higher risk for an audit
  • Employees don’t view the benefit as a valuable part of their compensation package, making the 401(k) plan ineffective as a retention tool
  • HR managers take on the brunt of educating employees on financial and investment topics, leaving less time for their other responsibilities
  • Business owners and other highly-compensated employees can’t save as much as they want because there aren’t enough employees participating

In this report, we’ll explore specific survey questions we asked employees regarding investment decisions, retirement goal confidence and 401(k) service provider trust. In addition, we’ll provide full results to the nine-question IQ quiz at the end.

*Research methodology: KRC Research surveyed 1,013 American small and mid-sized business employees whose companies offer a 401(k) plan. Respondents were selected to represent an even mix of demographics and company sizes. The research was collected via a 10 minute online survey from October 7 to 11, 2016.

The 401(k) Education Gap

Employees tend to understand the big picture when it comes to 401(k) plans, but quickly struggle with specifics.

Nearly three-out-of-four respondents failed our 401(k) knowledge quiz which included questions like:

  • At what age can you begin to withdraw money from your retirement account without incurring penalties?
  • Can you borrow from your 401(k) plan?
  • True or false, the money invested in a traditional 401(k) plan reduces your taxable income.

We found that most employees didn’t pass this knowledge quiz regardless of the size of the company they worked at. In the survey, employees also shared that they don’t prioritize 401(k) education or retirement planning in general.

71% of Employees Fail 401(k) IQ Quiz

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Investment Decisions

Half of respondents lack confidence in their ability to choose 401(k) plan investments, and two-thirds don’t know how to choose investments to reach their retirement goals.

The survey revealed that not only do employees lack confidence in selecting their investments, they also aren’t sure whether they’ll reach their retirement goals. In addition, employees reported that they don’t have confidence in the financial resources available to them.

Overall, many employees don’t have the information they need and don’t know where to turn to for help, so they end up either not saving—or not saving enough—for retirement.

Half Aren’t Confident in their Investment Selections

401k_IQ_in_the_Workplace_Survey_Report-confidence-chart.png

401(k) Service Provider Trust and Satisfaction

Two-thirds of employees are not very satisfied with the service delivered by their 401(k) provider

Two-out-of-three employees at all companies were not very satisfied with their 401(k) service, and worse, three-out-of-four employees at businesses with five to 200 employees weren’t satisfied with their 401(k) service provider. This isn’t surprising, as we also found that only 29% of employees are confident in planning with the 401(k) sources they have.

67% are Dissatisfied with their 401(k) Service Provider

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“I prefer 401(k) management support from my employer”
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When asked, nearly 80% of respondents said they would prefer working for an employer that “proactively helps you get on track and stay on track for a comfortable retirement” compared to employers who simply “offer a 401(k) plan.”

Bridging the Gap with Trusted Partners

  • 49% of employees are not confident in their ability to choose 401(k) plan investments
  • 67% of employees are not satisfied with their 401(k) provider
  • 71% of employees failed the 401(k) IQ in the Workplace quiz

401(k) plan can be one of the most compelling benefits for attracting and retaining valued staff—but only if your employees actually take advantage of it. Partner with a 401(k) service provider who will help put your 401(k) plan above your competition’s, and help put your employees in position to build toward their future.

About Fisher Investments 401(k) Solutions

Fisher Investments 401(k) Solutions is dedicated to helping small and mid-size businesses with their plans while helping their employees reach their retirement goals. We seek to offer comprehensive 401(k) plan services that are designed to help employees optimize their retirement savings while easing the company’s risk and administrative burden.

  • One-on-one employee meetings with all eligible employees to support their unique, individual retirement goals
  • Ongoing education on financial topics such as budgeting, investing, debt management
  • Personalized service and support with dedicated retirement advisers who aren’t sales people
  • Investment options for different types of investors

401(k) IQ Workplace Quiz Results

Questions Answers
1 Do you know what a 401(k) match is? Correct Answer: Yes
88% of respondents correct
2 Do you know what percentage of your salary you need to invest in your 401(k) to successfully save enough for your retirement? Correct Answer: Yes
43% of respondents correct
3 As defined by the IRS, at what age can you withdraw money from your 401(k) without a penalty? Correct Answer: Age 59.5
22% of respondents correct
4 True or False: In most cases, people can combine a 401(k) plan from their previous employer to a 401(k) plan with their current employer. Correct Answer: True
73% of respondents correct
5 True or False: People that take money from their 401(k) before retirement age will face income tax and penalties on the withdrawal amount. Correct Answer: True
87% of respondents correct
6 True or False: In most cases, people cannot borrow from their 401(k). Correct Answer: False
60% of respondents correct
7 True or False: In most cases, once a 401(k) investment plan is set up, people are not allowed to change their investment options. Correct Answer: False
76% of respondents correct
8 True or False: The money I invest in a traditional 401(k) plan reduces my taxable income. Correct Answer: True
67% of respondents correct
9 What statement is false about a mutual fund?
  1. A mutual fund is an investment vehicle that is made up of a pool of funds collected from many investors.
  2. The decisions to buy and sell securities in a mutual fund are made by one or more portfolio managers.
  3. A mutual fund is limited to no more than 10 different financial securities in the portfolio.
Correct Answer: C
24% of respondents correct

*Research methodology: KRC Research surveyed 1,013 American small and mid-sized business employees whose companies offer a 401(k) plan. Respondents were selected to represent an even mix of demographics and company sizes. The research was collected via a 10 minute online survey from October 7 to 11, 2016.

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About Us

Fisher Investments 401(k) Solutions is dedicated to helping small and mid-size businesses deliver successful ‭retirement plan services. Our success is defined by each business achieving its custom 401(k) plan goals and by ‭empowering employees with the dedicated support and resources necessary to achieve a dignified retirement. Our ‭solutions are built on the core principles of providing employers and employees ready access to dedicated 401(k) ‭specialists, flexible investment options, and fee transparency.

The Fisher Investments Resource Library is designed to support 401(k) Plan Sponsors with insights, tools and ‭answers without obligation.

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