Is a Lack of Trust Hurting Your Retirement Plan?

Despite widespread worry about retirement security, 401(k) participants aren't exactly jumping at the opportunity to get free professional advice. According to Schwab, while more than half of 401(k) participants it surveyed said they would take advantage of free professional advice, just 10 percent who currently have access to advice are using it. In announcing the survey results, Schwab highlighted the leading reasons why folks are turning down free personalized help:

27 percent say they are getting financial advice elsewhere outside of the workplace.

26 percent say they have more immediate concerns, such as day-to-day financial matters.

23 percent don't think they have saved enough money to warrant spending time to get help.

49 percent want to have more than $100,000 saved before taking the time to get advice.

But what caught my eye was a data chart from Schwab that wasn't played up in the press release. It suggests there is a troubling lack of trust at play as well. More than 70 percent of survey respondents say they either have no trust or just a little trust in their employer or the company managing their plan to do them right:

Skepticism is my middle name, but this is one area where I think participants are missing a great opportunity. Given how many moving pieces there are to managing your 401(k), why not at the very least listen to some outside advice? It's still your call on whether you act on that advice. For what it's worth (and it could be worth a lot) Schwab's research suggests advice-takers gain an edge over advice-shunners:

• Improved savings rates: Seventy percent of participants who receive 401(k) advice make changes to their deferral rates, and their savings rates nearly double as a result, jumping on average from five percent to 10 percent of pay.

• Greater diversification: The average participant who has not received professional advice is invested in less than four asset classes, whereas participants who receive advice have a minimum of eight asset classes.

• More disciplined investing behavior:The vast majority (92%) of advice users stayed the course in their 401(k) portfolios from July 2008 through February 2009 and was fully invested for the significant market rebound through the remainder of 2009.

As for the lack of trust that an employer has your best interest in mind, I think that's irrelevant here. What matters is your employer's self-interest in making sure you are ready to retire. If you don't have enough saved up you're more likely to want to stay put long after your welcome may be worn out. So it's actually in your employer's best interest to make sure you get the best 401(k) advice.

Related Articles on MoneyWatch:
Are You Paying Too Much for Advice?
Retirement Planning Most of Wall Street Doesn't Want You to Know About

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