The tension in 401(k)s: Autopilot with as much guidance as possible

Employers are increasingly striving to accommodate two groups of people — those who want everything done automatically in their 401(k) and those who want as much guidance as possible.

Sixty-two percent of plan participants say they would gladly hand discretion over their retirement planning to someone, up from the 55% who said that in 2016, according to a report published last week by J.P. Morgan Asset Management. More than half of people also said that their retirement plans give them more information than they can handle and that they don't read most of the investment information they have access to.

However, many still want guidance — two-thirds said that employers should include financial advice or coaching as part of the company retirement plan, and that figure was higher among workers under 30, at 74%.

For the report, J.P. Morgan hired Greenwald Research to survey more than 1,200 defined-contribution plan participants in January.

More than half — 51% — said they want to spend time planning for retirement but are confused about how to start, according to the report. That was the case for 65% of people under 30.

About nine in 10 said that retirement plans are a factor they consider before accepting a job, J.P. Morgan found.

Even if they're automatically enrolled in the plan, many also said they would like professional guidance, including advice that goes beyond saving for retirement. Most, about 75%, said that they want advice about how much to save, with 70% saying that it is incumbent on their employer to help provide that.

About 30% of workers said they research and make investment decisions on their own, and the rest relied at least in part on professional guidance. While 80% of workers said they would welcome the chance to work with a financial coach provided through their plan, 58% said they would only use such a service if it were provided at no cost, the report noted.

Workers largely said they liked financial wellness programs, which incorporate budgeting, debt management and health savings with retirement planning. More than 90% said they like the concept of financial wellness guidance, while 55% said their plans included such a feature.

As automatic features have become the norm in retirement plans, people seem to have welcomed that, the report found. That includes being defaulted into the plan in an all-in-one investment vehicle like a target-date fund.

Among people who were automatically enrolled in their plans, 97% said that they were at least somewhat satisfied with that, according to J.P. Morgan. Additionally, about 20% of people who were automatically enrolled said that they would not have started participating otherwise.

As of 2018, 39% of all DC savers were in plans that used automatic enrollment, according to figures recently published by the Investment Company Institute and BrightScope. The figure is lower by plans, with 31% of employers automatically enrolling workers, the report found, because the plan feature is used much more commonly by large employers, which represent a large percentage of assets and participants but a smaller proportion of all plans in the country.

While 60% of plans with at least $1 billion used automatic enrollment, that was the case for less than 23% of plans with between $1 million and $10 million.

Target-date funds represented 25.1% of 401(k) plan assets as of 2018, the report found.

Nearly 90% of retirement plan participants like target-date funds, according to J.P. Morgan’s recent survey.

“Even within the 47% of participants who prefer to make their own investment decisions, 86% like the idea,” that report noted. “However, less than three out of 10 participants are invested in a TDF.”

That low figure reflects the fact that it's much more common for younger workers who invest in target-date funds being invested in much more commonly by younger workers, and many younger workers have considerably smaller balances than participants who have been saving for decades.