Investors don't have a clue about using 401(k) savings, Cerulli says

Investors don't have a clue about using 401(k) savings, Cerulli says
Plan participants have no idea how they will use their 401(k) savings when they retire, Cerulli study shows.
JUN 29, 2018

A new study from research firm Cerulli Associates finds that most investors who have accumulated a retirement nest egg in a 401(k) plan are "clueless" about how to use the money. When asked what they will do with their accumulated savings, one quarter of respondents explicitly answered, "I don't know," Cerulli said. Another quarter said they "will ask my existing financial adviser for advice." Cerulli said the latter answer is probably a marginally more prepared version of "I don't know." "In sum, this suggests that half of 401(k) plan participants have no idea what to do with the savings they have diligently set aside for retirement," Cerulli said. The survey found that 8.5% of respondents would hire a financial adviser to help them. For advisers specializing in the plan business, Cerulli suggests working closely with plan sponsors to identify the sponsor's preferences when it comes to retaining the assets of retired participants in the plan and ensure these preferences are reflected in the plan's available distribution options. Advisers and sponsors also should implement targeted campaigns to plan participants approaching retirement to explain their options upon reaching retirement, Cerulli said. Advisers generally can find many opportunities in helping clients support a thoughtful and sustainable drawdown strategy, Cerulli said. In its study, Cerulli found that the average retirement age for men and women among 401(k) plan participants was 64.6 and 64.2, respectively. "This is somewhat troubling given that women, on average, are expected to live almost three years longer than their male counterparts," Cerulli said, noting that given the average retirement age and average life expectancies, "Americans will need enough retirement savings to fund their living expenses for almost two decades — a daunting prospect." (More: Guaranteed income tops boomers' retirement wish list)

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