BOSTON (TheStreet) -- Retirement planning is no easy task. Decisions about deferral rates, asset allocations, diversification and suitable funds can sometimes prove mind-boggling for unskilled investors.
Although 401(k) participants commonly grouse that they need more help and advice, very few actually use the help offered them by their employer.
released the findings of a research study on the behavior of 401(k) plan participants. It included an analysis of the 401(k) plans serviced by Schwab and a nationwide survey of more than 1,000 plan participants.
It found that 70% of respondents said their 401(k) is their only or primary source of retirement savings, but less than half (47%) said they are "very confident" when it comes to making investment decisions. Roughly 53% said they find their retirement plans even more confusing than health care benefits.
But while a majority (55%) said they would use free, personalized guidance if their employer made it available to them, an analysis of actual participant behavior in plans serviced by Schwab revealed something different: Less than 10% of people with access to advice actively use it.
"When I look at certain behaviors, like enrolling or how much you are saving, it has always been a tough conversation with individuals to make sure they are on track the way they should be," says Catherine Golladay, Schwab's vice president of 401(k) education and advice. "But there is such disconnect between what people said they would do and what they do. That's a real shame, because advice is proven to have such beneficial outcomes, and really the responsibility for retirement rests pretty much solely on the shoulders of individuals. We need to find a way to ensure that people are taking advantage of all the tools that they do have."
The reasons given for not taking advantage of advice offers: They are getting financial advice elsewhere outside of the workplace; they have more immediate concerns, such as day-to-day financial matters; they don't think they have saved enough money to warrant spending time to get help.
"Something that was disconcerting to me is that when you talk to individuals about what would prompt them to take advice, you started seeing this theme around people feeling like, 'That can't possibly be for me, I don't have enough in my account balance,'" Golladay says. "There is this theme that they don't think they have enough in their account to warrant it. Forty-nine percent said they want to have more than $100,000 saved before taking the time to get advice. That's clearly far too late. Another trigger is approaching retirement, so they are planning for retirement when that is right on the horizon. Again, it is clearly too late at that point."
Schwab's report stresses the "significant impact" professional advice can have on a participants' saving, diversification and investing behavior. Seventy percent of participants who get 401(k) advice make changes to their deferral, and their savings rates nearly double as a result, jumping on average to 10% of pay from 5%. The average participant who has not received guidance is invested in less than four (3.7) asset classes, whereas participants who get advice have a minimum of eight asset classes.
Acknowledging the role the workplace can play in providing financial education, a significant number (74%) of Schwab's plan sponsor clients are offering 401(k) participants access to professional, third-party investment advice. That number has grown from 42% in 2005.
The survey found that one-on-one consultations are more in demand among participants. Fifty-one percent said they prefer "a personalized touch" over online tools (23%) or brochures (4%). More than one-third said they would like some kind of proof that advice would improve their investment returns.
-- Written by Joe Mont in Boston.
>To contact the writer of this article, click here:
>To follow the writer on Twitter, go to
>To submit a news tip, send an email to:
Get more stock ideas and investing advice on our sister site,