If it wasn’t already a known commodity to industry stakeholders and workers saving for retirement, a new study finds that the 401(k) is becoming a non-negotiable benefit for job seekers. 
When considering a new employer, nearly 9 in 10 workers (88%) say a 401(k) is a “must-have” benefit and three in four would refuse a new job if it did not offer a 401(k) plan. This is according to Charles Schwab’s annual nationwide survey of 401(k) plan participants.
Having a 401(k) plan was second only to health insurance, which 90% indicated is a must-have benefit. There was a steep drop-off following health and a 401(k) plan: life insurance (46%), disability insurance (43%) and flexible work hours/location (41%) were next in line.
"Placing such a high priority on their 401(k) is not surprising since it is their primary retirement resource, with workers counting on it to deliver 40% of their retirement income,” said Marci Stewart, Director, Communication Consulting and Participant Education for Schwab Workplace Financial Services. “That’s double what workers expect from the next closest source, which is Social Security at 20% of retirement income.”
Prioritizing 401(k) Saving
Employees also continue to prioritize 401(k) saving, even though inflation and market volatility are impacting their ability to save for retirement to a greater extent than last year.
The survey found that 62% of employees consider inflation an obstacle to saving for a comfortable retirement, up from 45% last year, and 42% say stock market volatility is an obstacle, up from 33% last year. Nearly 8 in 10 (78%) say these conditions are impacting their spending and saving habits, and 36% plan to delay retirement as a result.
Compared to last year, more employees also are saving for retirement in a savings accounts (68% vs. 61%), investing in an IRA (47% vs. 33%) and investing through a brokerage account (38% vs. 29%) as they look to augment their primary retirement fund with other methods of saving and investing.
“While many workers are trying to cut back on spending, some costs are unavoidable and certain areas of their finances have taken a hit,” observes Brian Bender, head of Schwab Workplace Financial Services. “Despite these challenges, retirement saving continues to be a priority for workers, who have maintained their 401(k) savings rates and largely stayed on top of their 401(k) investments over the past year.”
How Much to Retire?
And while most do not believe they will get there, additional findings show that employees now believe they’ll need to save an average of $1.8 million for retirement, compared to $1.7 million last year. While this amount hasn’t shifted dramatically, only about 3 in 10 workers (37%) think it’s “very likely” they’ll achieve this target, down by 10% from last year.
Confidence may have taken a hit, but savers are still hopeful, Schwab notes. Nearly half (49%) still feel “somewhat likely” to reach their goals and only 14% feel they are “not at all likely” to reach their goals.
New Tech vs. Human Touch
Meanwhile, even as new technologies emerge, employees still prefer the human touch. According to the findings, half of them would feel comfortable asking artificial intelligence (AI) tools like ChatGPT for help with financial planning, but for now, actual adoption is very low (4%). Employees are still most likely to follow advice from a human professional (95%) over computer-generated advice (74%).
SECURE 2.0 Effect
Employees also want help understanding how new regulatory and legislative changes like the SECURE 2.0 Act affect their retirement plan.
Just over half (56%) of employees have heard of SECURE 2.0. Among the provisions in the new law, Schwab found that employees are most aware of the increased age for required minimum distributions (RMDs) (41%) and the increased 401(k) catch-up contribution limits starting in 2025 for those aged 60 to 63 (40%). Trailing not far behind, however, were easier 401(k) withdrawals for emergency expenses at 39% and increased automatic enrollments in a 401(k) at 38%.
“It’s encouraging to see that many workers are in-tune with the evolving rules and regulations surrounding their retirement plans,” adds Stewart. “By understanding what matters to employees, employers can drive engagement as they fine tune their benefit offerings to optimize recruitment and retention.”
The survey of 1,000 U.S. 401(k) plan participants was conducted by Logica Research between April 19 and May 2, 2023. Survey respondents were actively employed by companies with at least 25 employees, were 401(k) plan participants and were 21-70 years old. Respondents included participants served by approximately 15 different retirement plan providers.
Additional results can be found here.
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