- In a poll of 1,002 401k plan participants with at least $5,000 saved, 56% said they were on track with their retirement goals, up from 52% a year ago, reports Bloomberg. The poll, conducted by financial managing firm BlackRock, also found that 70% think they can save enough for retirement.
- Bloomberg said the poll suggests that 401k plan participants are overly confident about stock rates of return. About 66% said they expect the next decade’s returns to be as high as they were previously, while 17% expect even higher rates. Another two-thirds said they didn’t know Wall Street expected lower market returns in upcoming decades.
- The survey also shows that employees’ views follow those of the 200 plan sponsors polled. Most of the benefit and financial specialists (70%) predict that annualized stock returns during the next 10 years will be the same or better than the past performance. A greater number (78%) think bonds will perform the same or higher.
President Donald Trump’s address to a joint session of Congress last week might have shot up the S&P 500 Index 1.4% in a record 24 hours, but Bloomberg says the surge is likely optimism on the part of financial professionals. As expected, the market has since dropped slightly.
Optimism might give employees false hopes about reaching their retirement goals, but that’s not necessarily harmful. As Bloomberg notes, optimism encourages people to be proactive about saving for retirement and other lifestyle goals.
Employers can provide plan participants with practical investment savings advice through financial professionals, so long as they comply with the latest developments on the fiduciary rule. It may also be in employers' best interest to provide practical financial training.
Studies show millennials to be more open to financial advice than older generations, and many look to their employers for information. Other research suggests long-term savers are more likely to reach their retirement goals.
Ultimately, it's best for 401k plan participants to keep an eye on their savings instead of an ever-rising and falling stock market.