The survey, which was conducted online by Brightworks Partners with 2,161 active 401(k) participants, uncovered some surprising contrasts between what Americans say they want -- and what they are actually doing -- in terms of their savings habits.
Retirement Remains A Priority But Investors Aren''t Maximizing Contributions
More than ever before, Americans view retirement as their primary savings objective as indicated by 85 percent of those polled. This represents an increase historically and illustrates that virtually everyone is focused on this issue right now. But while people claim that retirement is a top priority, they are not taking advantage of the best savings vehicle. The survey found that the overwhelming majority of investors are not investing the current maximum and nearly 60 percent do not even contribute half the allowable amount.
Investors Lack Retirement Goals
The Putnam study also shows that investors do not have a clear understanding of their retirement savings goals. Despite concerns from investors about meeting their retirement needs, many respondents have not identified specific retirement savings goals and don''t know how much money they will need for retirement. The survey indicates that only 54 percent of people are confident that they know how much money they will need in retirement. That would mean that almost as many people are saving without a clear goal in mind. "The fact that many Americans don''t know what they''ll need when they retire demonstrates a need for further education and awareness about investment decisions," said Pasciucco. "It is far more difficult to actively manage your retirement savings without an idea of what success is. Establishing a goal is an important first step in retirement planning. It is very difficult to be a disciplined saver and far too easy to avoid it if the cause and effect are not evident."
Investment Decision Making
Curiously, most Americans spend about as much time evaluating their 401(k) investment options as they spend buying a new appliance. The Putnam Participant Poll indicates that 71 percent of participants spend about as much time researching, reading, and talking to people to make their 401(k) investment decisions as they spend buying a new television. The average amount of time spent is 127 minutes or a little more than two hours, while some seven percent spend less than five minutes. "This can be attributed to human nature, and in many cases, to instant gratification," said Pasciucco. "Retirement is a far-off concept to many and shopping for the plasma screen can be a lot more fun. Providers need to present a compelling case for 401(k) investing, and provide simple investment choices and an easy to use interface."
New Investment Options Trigger Action/Investors Read Statements
The majority of 401(k) investors don''t make changes to their investments, but when they do, the overwhelming reason is, as expected, due to investment underperformance. The unexpected and second largest reason investors make changes to their plans occurs when investment options are added. Twenty-eight percent of participants change funds when an investment option is added to their 401(k) plans. "This is a silver lining for employers who may have been reluctant to make changes to their retirement plan investment lineup," said Pasciucco. "Adding or changing investment options prompts investors to take another look at their retirement plans." The survey also indicates that 92 percent of participants open their statements and of that, 77 percent review their statements carefully, recanting the myth that 401(k) statements go on the shelf. "The statement is a communications medium that could be better utilized by Employers," said Pasciucco. "When investors give you their attention - listen and leverage it."
About The Survey: A total of 2,161 active 401(k) respondents participated nationally. Respondents qualified for the survey by contributing to a 401(k) balance with current employer of $1,000 or more. The survey was conducted online from February 25, 2003 through March 20, 2003 by Brightworks Partners of Old Greenwich, Connecticut. Visit www.putnaminvestments.com for more information.