Advisors boost workers' 401(k) confidence, finds Pontera

A new survey by Pontera highlights the significant role financial advisors play in improving retirement outcomes for US workers participating in 401(k) plans.

The Pontera 401(k) Literacy Survey, which polled 2,010 full-time workers across the country, revealed that participants working with financial professionals are more confident, knowledgeable, and contribute more to their retirement accounts compared to those without professional guidance.

According to the survey, eight in ten respondents who have an advisor – and all Baby Boomer respondents – expressed greater confidence in their retirement planning. The results suggest that participants with advisors have a better understanding of their 401(k) plans, with 90 percent of advised individuals feeling their allocations align with their overall financial strategy, compared to 75 percent of non-advised workers.

That impact's also clear to see in people's contributions. Sixty-six percent of advised participants contribute the maximum to their 401(k), compared to only 40 percent of those without an advisor. On average, advised participants allocate 15 percent of their income toward their retirement accounts, while non-advised participants contribute just 10 percent.

“Our survey reinforces what we have long proclaimed: Advisors help retirement savers achieve better outcomes,” Yoav Zurel, co-founder and chief executive of Pontera, said in a statement.

With traditional pensions becoming increasingly rare and Social Security's future uncertain, employer-sponsored retirement plans have become a key pillar of retirement security. The survey found that 81 percent of participants view their 401(k) as the most critical component of their retirement savings strategy. Yet, despite the importance of these accounts, many respondents reported challenges in managing their investments.

The survey noted that 80 percent of participants encounter at least one difficulty managing their workplace retirement plans, with 87 percent facing issues when selecting investments. The figure is even higher for younger savers, with 92 percent of Gen Z respondents experiencing challenges.

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The Pontera survey also tested participants' knowledge through a nine-question "401(k) Literacy Quiz." Although many workers perceive themselves as financially literate, 85 percent of respondents failed to answer all questions correctly, and 46 percent received a grade equivalent to a "C" or lower.

“Financial literacy is a major issue for our society when individuals are responsible for saving for their retirement,” Zurel stressed.

The survey revealed that 74 percent of respondents were unaware of the age at which catch-up contributions can begin, and nearly one-third of participants couldn’t recall how much they pay in plan fees.

For workers with advisors, however, the picture was notably brighter. The survey found that 81 percent of advised participants know how much they pay in plan fees, compared to 62 percent of those without advisors. Moreover, 51 percent of advised respondents monitor their accounts weekly, compared to 34 percent of non-advised individuals.

“It’s abundantly clear that enabling personalized, in-plan 401(k) advice from their trusted advisor is an important solution to the challenges faced by many retirement savers,” said David Goldman, chief business officer at Pontera.