Fidelity® Survey Finds Majority of Workplace Investors Would Not Be Saving for Retirement Without a 401(k) Plan

BOSTON--(BUSINESS WIRE)--Fidelity Investments^®, the nation’s No. 1 provider of workplace retirement savings plans and individual retirement accounts (IRAs)¹, today announced survey² results that reveal more than half (55 percent) of current workplace savings plan participants say they would not be saving for retirement if not for their 401(k) plan. The research, which highlights the savings behaviors of current and former 401(k) participants in a challenging economy, also found nearly one in five respondents (19 percent) currently enrolled in workplace plans report they have no retirement savings at all outside this key retirement benefit.

“It also provides an interesting snapshot of the actions of workplace plan participants in an uncertain economic climate and highlights the importance of Fidelity’s wide array of financial education offerings, from online tools to one-on-one guidance.”

“This research helps us better understand how Americans use their 401(k)s to help achieve their long-term retirement savings goals,” said James M. MacDonald, President, Workplace Investing, Fidelity Investments. “It also provides an interesting snapshot of the actions of workplace plan participants in an uncertain economic climate and highlights the importance of Fidelity’s wide array of financial education offerings, from online tools to one-on-one guidance.”

Fidelity surveyed 1,000 current and retired workplace plan participants on their attitudes and behaviors toward retirement savings. When asked about top reasons for participating in the plans, 92 percent of current workplace participants indicated it was important or very important not to lose out on company match dollars, and 90 percent felt the plans were a good tax-deferred way to save. However, economic conditions still present a challenge for many, with more than half (54 percent) of working respondents reporting they would contribute more to their 401(k)s if they could.

Company Match Often a Factor When Increasing or Decreasing Savings

In May, Fidelity reported that nearly one in 10 corporate defined contribution participants increased their contribution rate during the first quarter of 2011, the largest percentage to do so since Fidelity started tracking the figure in 2006.³ This corresponds with the survey that found more than half (53 percent) of working respondents increased their contribution rate in the last five years, despite historic market volatility and economic uncertainty.

When asked why they increased their contributions, 23 percent of working respondents said they wanted to take full advantage of employer matching dollars, and 38 percent said they had received a raise or had extra money available.

Only 23 percent of working respondents reported ever decreasing their workplace plan contribution percentage. For those who decreased contributions, 46 percent reported needing extra money, and 9 percent said it was due to the elimination of a company match. Forty percent of these respondents said they already do – or possibly will – regret the decision to decrease their retirement savings contribution.

Many Who Borrow from 401(k)s Would Not Do So Again

The prevalence of loans and withdrawals from 401(k)s is a concern, yet for some retirement investors they may be a necessity. Fidelity’s survey found that nearly one quarter (23 percent) of working respondents have taken a loan from their retirement plan, with many saying they needed to do so for an unforeseen emergency. But when asked about the decision, 29 percent of these respondents indicated they would not do so again.

While Fidelity’s plan data⁴ show a slight drop in 401(k) loans in the first quarter, the company said it’s important that participants considering a loan consult with a professional in order to assess such factors as potential tax implications, fees, loss of investment gains and repayment schedule. Many plan sponsors require complete repayment of the loan within 60 days if the participant leaves the company or is laid off, which could trigger a fee and tax bill.

IRA Top Retirement Savings Vehicle Outside of 401(k) Plan

To supplement their workplace plan, 37 percent of working respondents are building retirement savings in an IRA. In addition, 33 percent are in an employer-sponsored pension plan, 28 percent have savings in bank accounts, and 28 percent have investments in stocks or bonds. Pre-retirees 55 and older are the most active users of IRAs, with 44 percent saying they utilize these retirement savings investments.

Fidelity Offers Broad Range of Guidance to Participants

Fidelity offers its nearly 11 million workplace 401(k) retirement participants the educational guidance needed to help make informed decisions on their retirement planning goals, regardless of their age or life stage. This broad range of investment guidance includes web-based tools, workshops, on-demand webinars, and one-on-one consultations at employer locations or at 158 Fidelity investor centers nationwide.

About Fidelity Investments

Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $3.7 trillion, including managed assets of more than $1.6 trillion, as of May 31, 2011. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

Although consultations are one on one, guidance provided by Fidelity is educational in nature, is not individualized and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions.

Fidelity Brokerage Services LLC, Member NYSE, SIPC
900 Salem Street, Smithfield, RI 02917

Fidelity Investments Institutional Services Company, Inc.
100 Salem St., Smithfield, RI 02917

587934.1.0

¹ Cerulli Associates Quantitative Update Retirement Markets 2010 and Cerulli Edge Retirement Edition, Fourth Quarter 2010.

² Fidelity-sponsored quantitative study performed by Boston Research Group in February 2011 of 1,000 workplace savings plan participants and former plan participants (retired). 574 consumers were also asked why they do not participate in workplace savings plans.

³ Please note that Fidelity Investments Institutional Services Company, Inc. (FIIS) 401(k) plans, distributed through investment professionals, were excluded from the data provided.

⁴ As of March 31, 2011, 22.1% of active 401(k) participants had a loan outstanding, and 2.2% had taken a hardship withdrawal.