Workers Failing at financial literacy.
As a plan sponsor you take the time and effort to educate your employees and keep them engaged and up-to-date on their retirement plan. Endless emails, education programs, financial literacy materials and a great website from your provider have everything to help make your participants retirement experts. However, a new report from Fisher Investments 401(k) Solutions suggests that employees are failing in the area of financial literacy.
According to the Fisher Investments report on financial literacy, “ 71 percent of respondents failed Fisher’s 401(k) IQ in the Workplace Quiz, missing at least three of the nine basic questions.”
While most adults understood some of the basic tenets of 401(k) investing, such as “matching contributions”, less than half (43%) of the respondents know how much of their salary they needed to save for retirement.
“These results point to a larger issue that I see regularly with clients,” said Nathan Fisher, Managing Director and head of Fisher Investments 401(k) Solutions. “People tend to understand the big picture value of 401(k) plans, but when you start to get more specific they quickly struggle, which is a huge problem. If you don’t have a complete understanding of your 401(k) you might not select the best investments for your unique retirement needs. If you are not confident in your ability to pick investments, you might not save enough.”
Most Americans (88%) understand topics like 401(k) matching, but they struggled on the quiz when asked about additional topics that are critical to making 401(k) decisions. For example, only 24 percent of respondents could define a mutual fund and only 43 percent knew the percentage of their salary they should save for a comfortable retirement.
Additional findings from the survey include:
- Americans don’t trust their 401(k) providers: Trust is an important aspect of retirement planning – both trusting your employer and your advisers. Unfortunately, the survey found one out of four Americans does not trust their 401(k) provider. Interestingly, a third of respondents said that they look to friends or family members for information and guidance on 401(k)s. This number was much higher among millennials, with 41 percent saying they look to friends and family members for information.
- Women are less confident when it comes to 401(k)s: Though academic and industry research shows women tend to make more thoughtful investment decisions, when it comes to monitoring the progress of 401(k) accounts, only 1 in 5 women make it a priority. Moreover, women were less likely to say they know how to pick investments in their 401(k)s.
