Taking a ‘Calculated’ Approach to Retirement Readiness

Nathan Voris, with Schwab Retirement Plan Services, discusses how retirement calculators can be a useful resource for employees—by spurring them into action and providing them with more confidence about retirement readiness.

Plan sponsors are always thinking about which tools and resources will have the greatest impact on their employees’ engagement and outcomes. From online portals to webinars, there’s more information available to participants today than ever before, largely thanks to the Internet. Amid all of these useful options, you might be surprised to know, the humble online retirement calculator is really pulling its weight.

We recently surveyed 1,000 401(k) participants, and the vast majority (82%) said they are likely to use online tools to help them plan for retirement.1 Just over half have already utilized an online calculator. And, as it turns out, the results they received spurred them to action.

Of those who have used this type of calculator, 61% took a positive next step, such as: increasing their contribution level for their 401(k) and other retirement accounts, altering their spending habits, accessing online advice through their 401(k) plan, asking a financial professional for advice and even opening a new retirement account.

This kind of behavior is definitely commendable, and it reinforces a point that my colleagues and I think is so important. Wherever an employee is in their financial journey, we want to encourage them to take their next best step. The cumulative effect of all of these small steps is what moves participants from saving to investing to true financial ownership.

The other byproduct of retirement calculators is confidence. Forty-two percent of those who have used one felt confident after doing so—more than any other emotion that was listed for them to choose from.

Large groups also reported feeling relief and happiness. Most (71%) said they felt encouraged and wanted to learn more. From my perspective, we can’t underestimate the power of confidence in helping participants engage with their investments and make a plan they can stick to.

I should note that a much smaller percentage of people who’ve used an online retirement calculator reported feelings of frustration—and even panic or sadness. For them, this tool is no less valuable. Sometimes, getting an objective perspective on how much work we have to do is just what we need to overcome our inertia and take action that will improve our situation.

While many participants are self-starters, the reality is that they still want help. Nearly all respondents in the survey (95%) said they’d feel confident in their ability to make the right 401(k) investment decisions if they had the help of a financial professional, and 93% said they’re likely to follow financial advice from a professional. Seventy-two percent said they’d take advantage of help from a professional specifically to develop a financial plan, if it were offered by their employer.

And yet, about half (48%) of participants feel their situation doesn’t actually warrant professional advice. As those looking out for 401(k) participants, we need to work to address this misperception. After all, no matter how much a person has to invest, that money is part of their wealth, and they deserve the benefit of guidance to make the most of it.

The bigger picture here is that most Americans have a lot of work to do to save enough for a comfortable retirement. The people we polled believe they need $1.7 million, on average, for retirement. While everyone’s situation is different, this is a realistic projection—though getting there is going to be a challenge for most.

That’s why it’s so important for us to encourage participants to use all of the resources at their disposal—from consultations with a professional to simply plugging their information into an online retirement calculator to take their financial pulse. Participants tell us they want help. Together, we need to focus on leading them to it and making sure they know they deserve it.

[1]This online survey of U.S. 401(k) participants was conducted by Logica Research for Schwab Retirement Plan Services, Inc. Logica Research is neither affiliated with, nor employed by, Schwab Retirement Plan Services, Inc. The survey is based on 1,000 interviews and has a 3% margin of error at the 95% confidence level. Survey respondents worked for companies with at least 25 employees, were current contributors to their 401(k) plans and were 25 to 70 years old. Survey respondents were not asked to indicate whether they had a 401(k) account with Schwab Retirement Plan Services, Inc. All data is self-reported by study participants and is not verified or validated. Respondents participated in the study between March 19 and March 29.


Nathan Voris is managing director, business strategy at Schwab Retirement Plan Services.


This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of Institutional Shareholder Services Inc. (ISS) or its affiliates.