By Jeff Herman
“I Don’t Think Anyone Ever Really Accesses Their Account Once It’s Open.”
I remember hearing this from an office manager once. The unfortunate reality for employer-sponsored 401(k) plans is that many people don’t know how their 401(k) money is invested.
Once enrollment is complete, contributions happen automatically. Statements arrive. And somewhere along the way, many investors assume the account is being actively managed on their behalf.
That’s an expensive assumption to make.
Recent research shows that nearly half of Americans cannot identify how their 401(k) is allocated. That disconnect isn’t about apathy or irresponsibility. It’s about what happens, or doesn’t happen, after enrollment.
What We Can Learn From Young Investors
There’s a persistent narrative that younger generations aren’t preparing for retirement. The data doesn’t support that.
Gen Z workers are saving. Sure, their average 401(k) balances are lower primarily because they’re early in their careers. But that’s not because they aren’t contributing. In fact, many are saving at meaningful rates, especially once employer matches are included.
What truly differentiates this generation, and what we can learn from them, isn’t balance size.
It’s behavior.
A recent survey shows that Gen Z began working with financial advisors at an average age of 23, earlier than any previous generation. That early access to guidance changes outcomes.
Younger workers who partner with an investment advisor move beyond default investments, understand where their money goes, and make informed decisions rather than passive ones.
What I’ve learned in working with this demographic is that it’s not about achieving perfection in their portfolios. They demand direction.
That’s why, despite those smaller balances today, Gen Z reports higher confidence in their ability to retire comfortably than any other generation. They’re building habits early, asking questions sooner, and making investment decisions with support rather than guesswork.
Not only are they saving, but they’re also getting advice.
And that combination puts them in a stronger position long before the balances get large.
The Lesson Older Investors Can Learn
“I’d Expect to See a Higher Participation Rate and Higher Contribution Rate If We Had Someone to Discuss Investment Options With Our Employees.”
A COO once said this to me, and it supports the point above.
Retirement planning still works best when it’s personal. Because a 401(k) or IRA doesn’t ask questions. It doesn’t adapt on its own. And it doesn’t replace thoughtful discussion about goals, risk, and tradeoffs.
In many cases, automation is to blame. A 401(k) is designed to make saving easier. Payroll deductions, default investments, and simplified menus all help remove friction.
Without ongoing conversation, many accounts drift into default allocations that may not reflect an individual’s goals, risk tolerance, income trajectory, or broader financial picture. Allocations chosen years ago may never be revisited. Rollovers may sit in cash longer than intended.
Enrollment doesn’t create engagement. Conversation does.