Only 5% of Generation Z and 16% of Millennials state that Social Security will be their primary source of income in retirement, indicating that younger generations are likely skeptical about the fiscal viability and future existence of the program, according to findings compiled in the latest edition of Cerulli Edge—The Americas Asset and Wealth Management Edition.
The research shows that participants in 401(k) plans are more likely to rely on personal retirement accounts, creating an opportunity for plan providers to play a greater role in guiding participants’ decision-making.
Cerulli’s research found that more than half (58%) of Generation Z and Millennial participants with 401(k) plans expect their personal retirement accounts to be their main source of income during retirement. Meanwhile, 49% of all active 401(k) plan participants identify personal retirement accounts as their anticipated primary source of retirement income.
Despite this, the Boston-based international consulting firm finds that many 401(k) plan participants are disconnected from their retirement accounts. While the widespread adoption of default investments and automatic plan features has helped more individuals save for retirement, it has also led participants to take a “set it and forget it” approach to saving.
While some participants make use of the retirement planning resources offered by plan providers, there is significant room for improvement.
In 2024, 28% of participants said they had used their provider’s online tools and calculators in the past year, and 29% called their provider, although very few of those calls were related to retirement planning.
Cerulli’s research revealed that only 12% of those participants called “to assess their retirement readiness or to develop a retirement income strategy.” More often, calls were made to change investments, request technical support, understand fees, or transfer money out of their 401(k).
Cerulli suggests that retirement plan providers continue to develop and refine retirement planning tools to help participants set and update retirement goals, understand their standing in relation to those goals, and provide specific, actionable recommendations that could impact their retirement, including potential trade-offs.
“Plan providers have the opportunity to build trust with these participants to help retain assets and capture rollovers, whether to an individual retirement account (IRA) or from one plan to another,” said Elizabeth Chiffer, an analyst at the consulting firm.
“Whenever possible, providers should offer or promote interaction with in-house experts who can help answer questions and guide decision-making,” the expert concluded.
