woman and man looking confused with hands out expressing confusion (Photo: Shutterstock)

Pre-retirees have questions about how much money they will need to save for retirement and how long they will need to make those dollars last, according to a nationwide survey of 401(k) participants by Charles Schwab Retirement Plan Services.

The survey of 1,000 401(k) plan participants between the ages of 25 and 70 found that those who have sought the advice of a financial advisor were more confident in their investment decisions than those who haven’t. About half of participants believed they could benefit from advice about saving for retirement.

How much do I save?

The big question on respondents’ minds was how much money they will need for retirement, with 39 percent saying they could use help in this area.

When asked to estimate their retirement length and savings needs, participants on average said they expect to retire at age 65 and need $1.9 million saved.

Other questions participants need help with include anticipating tax expenses in retirement, creating an income stream during retirement, figuring out when to retire, choosing how to invest in a 401(k), and knowing what expenses they should expect in retirement.

Lower on the list of concerns were managing current expenses to maximize retirement savings, catching up on retirement savings goals, and managing debt.

One-third of respondents didn’t know how long they will need their retirement savings to last, and women were even more uncertain with 40 percent saying they don’t know compared with 25 percent of men. Two-thirds of respondents took a guess and the average response was 24 years.

What retirement income will I rely on?

The majority of participants (56 percent) think they will rely on multiple income streams during retirement, with 401(k) savings expected to provide 44 percent of income for participants.

Participants expect Social Security to provide 17 percent of their income, followed by savings and investments (15 percent), pension or defined benefit plans (10 percent), part-time work (4 percent), inheritance (3 percent), annuities or insurance products (3 percent), and real estate income (2 percent).

About 25 percent of survey participants are maxing out their contribution to their 401(k). Overall, participants contributed on average $10,600 in 2019, an increase from $8,788 in 2018.

Outside of their 401(k), participants are putting their money into savings accounts (57 percent), individual retirement accounts (48 percent), brokerage accounts (38 percent), and health savings accounts (24 percent).

“While consistent, disciplined savings habits are critically important, the investment choices typically available to you through an IRA or Health Savings Account may have more growth potential, for example, than deposits in a regular savings account,” said Catherine Golladay, executive vice president and head of Workplace Financial Services at Charles Schwab.

How should I use my HSA?

Three-quarters of respondents were offered an HSA at work, and about half have taken advantage of that option.

However, only 41 percent are using their HSA to save for health care costs in retirement, while a little more than half are using it to pay health insurance deductibles and 45 percent are saving for unexpected short-term health costs.

One-third contributed enough to their HSA to meet current costs and save for retirement, while 44 percent used all or most of their HSA funds in 2019.

“Healthcare is one of the leading expenses that people need to plan for in retirement,” Golladay said. “Increasingly, workplaces are adding HSAs to their line-up of financial wellness solutions for employees, and long term, this will be another important building block for people’s retirement security.”

Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM’s Retirement Advisor magazine and LifeHealthPro online channel. She also was a reporter for Business Insurance magazine covering workers compensation topics. Kristen graduated from the University of Missouri with a degree in journalism.

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