Participants Unmoved, Uncertain About Retirement Investing

December 17, 2002 ( - Despite volatile markets and looming retirements, the vast majority (81%) of participants are spending less than an hour a month checking in on their 401(k) plan, and 9% are spending no time at all, according to a new study.

Those findings represent a shocking shift from the 3% who spent no time at all and the 75% who spent less than 10 hours when the same survey was conducted two years ago by Mutual of Omaha in consultation with the Profit Sharing/401(k) Council of America (PSCA).   Just 17% spend more than 10 hours a year doing so.

More or Less?

However, the survey’s authors suggest that the amount of time participants spend reviewing their plans increases as household income and education level rises. Ironically, those who feel they are more knowledgeable about their 401(k) investment options also spend more time than their less knowledgeable counterparts reviewing their plan.

Some of that reluctance may be sheer ignorance.   Despite regular and significant investments in participant education, just 15% of these 401(k) participants said they were very knowledgeable about their retirement plan investments, about the same as two years ago.   Further, roughly 4 in 10 survey respondents said they were only slightly or not really that knowledgeable about investing overall.

Action Lacking

That lack of knowledge may also be translating into a lack of action.   More than half (55%) of participant respondents admit that they never adjust their 401(k) balances, up slightly from the 52% who said so in 2000.   Only 9% do so more than once a year.   When it comes to new monies, 33% say they never change, while 25% do so once a year, 22% do so every 2-3 years, 9% do so more than once a year, and 10% wait more than 3 years to do so.

Those who have made a shift in balances claimed the following rationale(s):

  • 71% – different/better mix
  • 20% – shift back/maintain
  • 6% – both of the above
  • 3% – neither

Roughly 55% do review their 401(k)’s investment performance quarterly, and 21% do so on a monthly basis – and most (54%) rely on employer-provided reports to do so.

Choice Voices

As for choices, roughly half (54%) of all participant respondents said that the number of funds they had to choose from was “about right”, while 20% said it was a little more than needed.   Interestingly enough, the more funds a participant had access to, the more likely they were to say the number was about right.   For example, 61% of those with access to 6-10 funds thought so, while roughly two-thirds of those with access to more than 10 funds did.   Only 42% of those with access to five funds or less said the number was about right – while 28% said it was a bit too much -and 26% said it was “not nearly enough.”   All in all, regardless of the number of fund choices, roughly 58% were using 2-5 – even when more than 20 are available.

Among participants that had invested in more than one fund, a quarter said that the weighting of fund selection was made based on a determination of risk, while 21% said it was based on past performance, and 18% simply split it evenly among those choices.   After that, the rationale dropped off quickly, with 8% leaning on the advice of a financial planner/advisor, a like number simply doing so based on a guess/coin flip – and another 8% who simply said they didn’t know how they made the choice.

Advice Slice

When it comes to seeking investment advice to help make those choices, the Internet was a frequently cited source (15%) - and cited more frequently than other media sources.   However, the study's authors caution that the Internet is utilized far more often by those who feel "very knowledgeable" about their 401(k) plan when compared to those only "slightly" or "not that knowledgeable" (34% versus 6%, respectively), suggesting that the Internet is perhaps a more "comfortable" source for the more knowledgeable investor.

As for plan-sponsored investment advice, roughly a quarter (26%) have access through their plan, and have used it - slightly less than the 30% who have access, but have not used it to date.   Twenty-eight percent say their plan does not offer investment advice - but 16% say they aren't sure if their plan offers access or not.   More than three-quarters (77%) of those who have used the investment advice say it has better equipped them to make investment decisions.

Nonetheless, an overwhelming 61% say they are not willing to pay for investment advice, even if said advice is "reasonably" priced.   About a quarter (27%) would be willing to pay - and 12% say their willingness "depends."   Participants who felt less knowledgeable about their 401(k) plan were more likely to be willing to pay, according to the survey.

When it comes to getting that advice, 39% wanted it one-on-one, while 22% preferred to get it online, and another 22% preferred written correspondence.   Only 11% preferred to get it over the phone, though 23% said that would be a secondary preference.

For programs that offered lifestyle or asset allocation models, only about a third of participant respondents actually take advantage of them.   Eighteen percent have access to, but do not use the models, 27% said their plan does not offer access to such models, and 21% were not sure if their plan offered such tools.

Needed Improvements?

Asked how their 401(k) plan could be improved, 20% cited investment performance, 18% said more and/or different fund options, while 12% wanted either more - or any - employer match.   However, a whopping 47% said "other", including:

  • 10% - lack of understanding of the plan
  • 10% - more/better information
  • 11% - a better stock market/economy
  • 5% - want to talk to a person

However, when it came to rating the service provided, ease of accessing information received the highest mean satisfaction score (8.00), with 51% of those who rated this component giving it a nine or ten rating on the 10-point scale.   Vesting schedule (7.68) and investment funds available (7.60) also fared well.   Lesser rankings went to:

  • Employer match (6.84)
  • Investment advice (6.58)
  • Ongoing education (6.25), and
  • Rate of return (5.85)

Overall, the average mean rating of 5.85 for rate of return compares to 7.41 in a comparable study performed in April 2000.

When asked what features they looked for in a 401(k) plan, participant respondents leaned heavily on investments, citing:

  • 28% - fund performance
  • 24% - diversity of choices
  • 24% - plan provisions
  • 10% - services provided

Of course, one in five said they either had no particular criteria, or weren't able to cite one.

Looking Back

Overall, 13% said that they were more conservative in their investments now than a year or two ago (1% were seeking more risk), while 8% were watching it more closely, 7% were contributing more (3% were contributing less), 4% were more diversified, and "other" claimed 7% of the responses.   However, a startling 60% said they were doing nothing different from a year or two previously.

The full 60 page survey results are online at