401(k) Trends: What Participants Are Prioritizing in 2023 (Part 1)

People come to Correct Capital – or any financial planner – for our insights and advice. But, for our services to be most effective, it’s important for us to hear back from our clients. In this episode of Capital Conversations, we delve into the findings of our recent 401(k) participant survey to see what’s most important in the mind’s of those saving for retirement.

Click Here to Download Our 2023 Annual 401(k) Participant Survey

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At Correct Capital Wealth Management, we take pride in our commitment to providing valuable insights to our clients, and this annual survey allows us to better serve them. In this first part of a two-part series, we'll explore the top three participant responses from this year's survey, from spending habits amidst challenging times to taking advantage of Roth contributions.

For recent investment news and our take on the current market, retirement planning, and investment, listen to our podcast Capital Conversations or view our recent blog posts. Below is the transcript of the first part of our current Capital Conversation podcast series, "401(k) Trends: What Participants Are Prioritizing in 2023."

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John Biedenstein: This is John Biedenstein with Correct Capital Wealth Management. I've got with me today –

Alexia Keil: Alexia Keil.

John Biedenstein: Alexia is one of our – is our only – relationship manager on the 401(k) side.

Alexia Keil: The best.

John Biedenstein: We're here to serve you. We're here for another Capital Conversations discussion, and this one is to talk about our recent 401(k) participant survey.

We have done now three surveys. I will tell you I've been in the 401(k) business or this field for a very long time. I don't know of any other firm other than Correct Capital that's done three of these. We've turned it into an annual affair that we provide to our clients and they, the HR, the CFO, the influential manager who's dealing with the plan, finds it interesting to see what a participant's perspective is in regards to their plan and help managing it.

So Alexi and I are going to go through the first three today.

Alexia Keil: Great.

John Biedenstein: And the first one of the participant responses this year was they felt that they, number one, did more with less.

Now, as you remember, last year was a difficult time. Especially end of 2022 when we were experiencing almost 8% inflation rates. So participants decided, “Well, I want to try to maybe maintain my standard of living, but maybe I want to cut back on a few things.” So they tried to spend a little bit less, and maybe maintain their retirement savings, maintain their debt payment scheduling, or those types of things.

So I think it's an interesting response that people actually took action to try to fix something that maybe wasn't a problem yet because everybody kind of controls their spending. What do you think, Alexia?

Alexia Keil: I agree. I mean, we all have gone to the grocery store recently, correct? Everything is costing more, and I was not at all surprised that that was the number one answer.

John Biedenstein: With the tough economic times, people seem to understand it and took corrective action on their own. The second item was the SECURE ACT [2.0]. And this is one of Alexia's specialties: Keeping up with tax legislation and 401(k) legislation.

Alexia Keil: Absolutely, and by popular demand. I didn't find – well I was kind of surprised it was the second most popular answer – and that was offering a match with Roth dollars instead of free tax dollars. And that is coming up in 2024. So the only issue there may be at this point is record keepers that are ready to be able to offer this benefit.

I'm not surprised. The reason obviously is taxes and inflation and everything else. People are really paying more attention to their taxation once they do retire.

John Biedenstein: Well, I think [another factor] is that participants love Roth contributions. They love the ability of making contributions that, if they set it aside, leave it alone for five years, or leave it alone until they retire, it's a tax-free bucket. With those tax-free buckets people just get a better handle on, “If I would have to withdraw this, I don't need to pay taxes on it.” I think it's a huge strategy that's helpful for everybody.

Alexia Keil: Absolutely

John Biedenstein: And then the third item, the third most popular item we had was... Lean

Alexia Keil: on me!

John Biedenstein: Not the song you think about, but… The question was for folks that need help. As financial advisors that work with 401(k) participants, we offer, in a number of different vehicles – whether it's our online broadcast or online communication, or whether it's in person communication – we're always offering folks the ability to talk to someone to help them in regards to their retirement plan accounts. Oftentimes it's going to lead to talking about other things. But on the retirement plan account and actually making your investment decisions, we've seen more people actually look at that and make changes on that. What's your thoughts there about things that would be concerning people over the last year when they said they actually looked up and tried to get some help on the investment side?

Alexia Keil: I just think it can be overly confusing. Just choosing investments, figuring out how much you need to save for retirement. I'm glad to see that individuals are taking a more proactive approach or would like to take more of a proactive approach when planning for their future.

John Biedenstein: So, candidly, what we see here is a lot of participants, by default, end up in what's called a target date fund. So you have certain instances where an individual might say, “Well, I'm not comfortable with that target data allocation. Maybe I want to be more aggressive.” Or maybe over the last year, the end of 2022 when they saw loss and saw declines in their account and both the fixed income and the equity side. So that was a more difficult thing to deal with, and they might have thought, “Well, maybe I should put my money in these things called stable value funds or guaranteed contracts.” They might've been the right place then, to save you from taking that investment loss, but it's simply a paper loss and folks that stuck with the strategy in 2023, you're seeing [that] fixed income funds have done better. Equity funds have done better. So some of that's coming back, but you do have some folks that just like stable value, guaranteed income, and maybe [they] should try to stick with that. What's your thoughts there?

Alexia Keil: Exactly. That's exactly it. And it's not always the best idea, but it is an option in most plans.

John Biedenstein: But again, what we provide within our menu is that folks can “do-it-yourself” in regards to choosing your own funds. In a lot of plans we have we include model portfolios. That's within the record keeping system; you can go and choose your own allocation based on some parameters we've built for you.

It's all really for the participants’ help. So, the survey that we have is accessible to you on correctcap.com under 401(k) services*. You can look for it and you can get a copy of it. So–

Alexia Keil: Thank you.

John Biedenstein: Alexia, it's been my pleasure to do this with you today.

Alexia Keil: No, my pleasure.

John Biedenstein: So thank you very much. We'll see you on our next Capital Conversations.

*Or download the 2023 401(k) participant survey here

Disclaimer: The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. As always, please remember, investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.

Correct Capital Wealth Management is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Correct Capital Wealth Management and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Correct Capital Wealth Management unless a client service agreement is in place.

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At Correct Capital, we're committed to providing valuable information and helping you feel at ease about your retirement planning. Our clients' financial well-being matters to us, and we're here to assist every step of the way. Whether you have questions about your retirement plan, tax implications, or investment strategies, speak to a financial advisor today by calling 877-930-4015 or filling out our online contact form.