Savers face plenty of large obstacles in putting money away for retirement: student loans, mortgages, credit card debt. But according to a new Schwab Retirement Plan Services survey, it’s the small, impulse purchases, like going out to eat, that savers come to regret.

The survey, which polled 1,000 401(k) plan holders, indicates that savers wish that they had sacrificed more in preparing for retirement. Most regretted spending money on dining out (55%), expensive clothing (31%), new cars (28%) and vacations (28%). “Participants understand the value of their 401(k)s and the importance of saving for retirement, but the findings suggest that they need guidance to prioritize their financial obligations and make the most of their assets,” said Steve Anderson, president of Schwab Retirement Plan Services, in a released statement.

Logica Research conducted the survey online in May 2018. Respondents were between the ages of 25 and 70, worked for companies with at least 25 employees and were actively contributing to their 401(k) plan at the time of their response.

Keeping Up with the Joneses

Respondents listed unexpected expenses (40%) and being unwilling to sacrifice their quality of life (34%) as the primary obstacles they faced to saving for retirement, even though 72% of them believed it was "more important to live frugally now to save more for retirement." 

“The survey shows that if given the chance, many Americans would have spent differently on short-term pleasures, especially compared to spending that supports their families’ long-term happiness and success,” Anderson said.

The Schwab survey findings are not unique. In fact, anxiety about spending less and saving more cuts across generations. A recent Credit Karma/Qualtrics survey found that nearly half of Millennials overspend to keep up with their friends, with 60% reporting that they spend too much money on food while going out and one-third regretting their alcohol purchases. Millennials also feel pressure to spend on clothes (40%) and other material items.

In an email to Investopedia, Catherine Golladay, senior vice president of Participant Services and Administration at Schwab, wrote that retirement savers are “having a particularly tough time balancing spending in the present with saving for the future." Echoing Anderson, she added that, “These findings suggest that [retirement savers] could use guidance on how to prioritize.”

While they may be having trouble prioritizing, retirement savers are, overall, optimistic about their own futures. Most respondents (70%) reported that they believed their quality of life in retirement will be better than that of their parents. However, they also expected their quality of life in retirement to outpace that of their children.

The Changing Face of Retirement

The survey illustrated how important defined-contribution plans have become for retirement savers: 88% of respondents ranked a 401(k) plan as a "must-have" benefit when looking for a new job. Likewise, respondents expected to be reliant on these employer-provided retirement vehicles once they left the workforce. Of those polled, 62% believe that their 401(k) will be their primary source of income after they leave the workforce. For comparison, just 10% expected to rely primarily on Social Security and just 6% expected to primarily draw from a pension.

The savings burden looms large. The plurality of respondents – 40% – identified saving enough for retirement as a “significant source of financial stress.” 

To help them bridge that gap, most respondents (71%) would like personalized investment advice specific to their 401(k), but only half believe that their situation warrants professional help. According to Golladay, “There seems to be a perception that you need to have accumulated a lot of wealth in order to deserve financial help.”

That’s unfortunate, as more than 75% of participants also indicated that they would be more confident in their investment decisions if they were to work with a professional.  A majority (53%) believe that doing so would improve their retirement savings outcomes. According to Golladay, “The survey shows that many people do understand the value of advice, and that their confidence in making good 401(k) investment decisions would increase substantially with that help.”

Luckily, the survey also indicates where respondents believe that advisors can add value. Respondents “named a number of specific areas in which they would appreciate help, such as calculating how much they need to save for retirement, knowing how to invest their 401(k) assets and determining at what age they can afford to retire," said Golladay.

The Bottom Line

For advisors who feel pressure to demonstrate their value, this survey provides actionable insights. In offering a complete financial planning solution to their clients, advisors can help them break their worst habits and add value outside of just picking investments. In other words, Golladay said, "It’s important for advisors to help clients understand the wide range of tasks with which they can receive guidance, like setting savings targets, choosing an investment strategy and managing debt in order to put more money towards retirement.”

She added that the industry should "continue to articulate the value of professional advice in achieving better incomes for retirement savers." To do so, it's important to focus on the benefits. Said Golladay, "We've observed that people who get professional 401(k) advice tend to have more income in retirement and are more likely to stay the course in uncertain markets."

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