401k Participants Who Use In-Plan Advice Have More Positive Retirement Outlooks

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Employees who say they use advisory services offered to them in their 401k plan have a distinctly more positive outlook about their future retirement versus those who do not, according to an analysis of data from the recent Mercer Workplace Survey. Nearly one-fifth (18%) of survey respondents say they engage with an online or in-person advisory service in their 401k plan. Although a relatively small percentage of the base, these participants are much more likely to feel that they will have enough money for retirement, can live as well or better than when working and will not have to delay retirement (See Figure 1).

This year’s Mercer Workplace Survey also revealed that awareness and availability of in-plan investment advice is high; in fact 79% of participants said that their plan offers some type of advice (online, in-person/telephonic, or both) up from 72% in 2011.

“This is great news for plan sponsors who offer advisory services in their 401k plan, as there is a clear correlation between positive retirement sentiment and engagement with these services,” said Dave Tolve, Administration Product Leader for Mercer. “Yet, with relatively low usage among participants – especially when you start to look at the demographics – there is still work to be done.”

Looking at the demographics of typical in-plan advice users compared to those who do not use these services shows participants who are younger; better-educated; and have higher incomes, balances and deferral rates.

“This profile of the typical in-plan advice user should give pause to plan sponsors who want to communicate the high value that investment advice services can provide,” said Suzanne Nolan, Administration Marketing and Communications Leader for Mercer. “These are participants who may in fact need this advice the least, given that they often have longer retirement savings horizons, tend to utilize outside advisors and potentially have both more financial and educational resources at their disposal. The true challenge for a plan sponsor offering in-plan advice is to reach those on the lower end of the income spectrum, where every dollar counts’, and who may also have a shorter timeframe in which to accomplish their retirement savings goals.”

Figure 1: Expectations in Retirement: which of these statements below do you expect will be true for you in retirement?

About the Mercer Workplace Survey

The 2012 Mercer Workplace Survey tracks employee attitudes toward, and experiences with, employer-sponsored retirement, health and benefits programs. The survey represents a national cross-section of active 401k participants, defined as those currently contributing to a 401k plan irrespective of balance or having a 401k balance of $1,000 or more with their current employer whether or not they are currently contributing. Eligible non-participants and those only holding balances at previous employers are not included in this research. Respondents are also required to be enrolled in their employer’s health plan. Online interviews were completed with 1,656 participants between June 6 and June 21, 2012. The survey’s margin of error is plus/minus 2.4%.