Just because participants in 401(k) plans have investment information doesn't mean that they will read it, according to a JPMorgan Retirement Plan Services survey.
Two-thirds of 401(k) participants don't read investment information provided by their plan executives, according to the survey — a surprising finding given the calls by some legislators for defined-contribution- plan executives and money managers to provide participants with more fee disclosure and financial information, said Diane Gallagher, vice president and head of participant communications and education at the unit of JPMorgan Chase & Co.
“There's so much scrutiny around disclosure, and the idea that more is better,” she said.
“But this validates what we've long believed — that participants are overwhelmed with the information they're receiving already. Participants want simplicity,” Ms. Gallagher said.
Similarly, in a survey conducted in February by registered investment adviser I-Pension LLC, 27% of responding participants admitted to not even opening their fourth-quarter-2008 statement. Of those who did, one-third spent less than a minute reading it, and 72% spent less than three minutes.
Despite that, the JPMorgan survey found that three of four participants have confidence in their own financial decision making — twice the level of confidence they have in their employer and five times that of
trust in government.
Robyn Credico, national director of defined-contribution consulting at Watson Wyatt Worldwide, said that her experiences jibe with the findings.
“Most monthly and quarterly communication efforts by DC vendors and plan sponsors are not effective at all, and the government wants to give participants more information to read, which will mean more wasted paper and more money pulled out of participant accounts to pay for it. It's not going to do much,” Ms. Credico said.
Even if they don't read the investment information, 401(k) participants still seem to understand the importance of saving for retirement.
The JPMorgan survey found that saving for retirement is the No. 1 financial priority for 27% of participants, second only to paying bills (32%). Sixteen percent said that paying off credit cards is the top priority, while 15% said paying off a mortgage is most important.
“There's definitely been a resetting of priorities,” Ms. Gallagher said. “For many people, 2008 was the first time they saw losses in their retirement accounts, so there is an urgency to regain what was lost.”
As a result, many participants have changed their monthly spending, the survey found.
For example, 56% of those surveyed said that they have stopped dining out as frequently, while 48% said that they have held off on making major purchases such as cars and appliances. Forty-four percent said that they use savings coupons more often, and 19% said that they have bought groceries in bulk.
Ms. Gallagher said that the top goal of DC plan and investment management executives should be to make sure that plan participants are “retirement ready.” According to the survey, just 9% of those surveyed are strongly confident that they won't outlive their retirement savings, and just 16% are “very” or “extremely” confident that they will be able to reach their financial goals for retirement.
“We have a confidence crisis among participants,” Ms. Gallagher said. “As an industry, we have to help them get ready and feel confident by providing proper savings projections, making the decision process as easy as possible, and by making sure they are invested appropriately.”
Despite last year's market upheaval, 77% of participants surveyed didn't change their 401(k) contributions in the past 12 months, the survey found.
The findings correspond with those of a survey released last month by the Profit Sharing/401k Council of America. It showed that the participation rate at the average DC plan rose to 82.7% last year, from 81.9% in 2007, and the average deferral rate was 5.5% last year, just slightly below the 5.6% rate in 2007.
Ms. Gallagher said that the fact that participants kept contributing through the market swoon was partly due to automatic-enrollment and auto-escalation features that have many DC plans have adopted.
The JPMorgan survey of more than 1,000 401(k) participants was conducted April 24 to May 1.
