Read More: Two-Thirds of Gen Y Would Change Jobs for Better Retirement Benefits
Being able to see a projection of the amount of income you will have each year is more helpful.
"We need to make it easier to make the transition from accumulation and savings to retirement," Axsater said. "Retirement programs need to communicate more than just the account balance and give an indication on the amount of income they will receive. Seeing an account of balance of $25,000 does not tell a 30-year- old employee very much."
A severe lack of financial education exists among the majority of employees with only 22% of respondents who said they are "extremely" knowledgeable or "very" knowledgeable about financial matters such as savings and investing.
Employees are aware that they need to save more for retirement now because the current market returns on stocks and bonds are generating "lower growth and expected returns" than previous cycles, he said.
"The same investor needs to save more," Axsater said. "It takes more today from a savings perceptive to reach a desired level of income replacement. Investors intuitively have a sense of that."
What is lacking is enough guidance from most employers since 34% of respondents said they get their retirement planning information from websites, advisors and financial publications.
Companies can do more since investors want to be engaged in a "dialogue with employers, advisors or friends," he said.
Younger investors gravitate to having a "buddy system" or finding another investor with a background and goals that are similar to theirs.
"Social media is well equipped to provide an ongoing engagement and to connect similar investors," Axsater said. "Retirement is important to younger investors who have lived through the financial crisis and have seen the effects directly from their parents."
Employers are recognizing that the financial health of their employees is important and need to receive the right amount of guidance, said Simon Roy, president of Jemstep, a Los Altos, Calif.-based software program which allows investors to load and link all of their current and previous retirement and brokerage accounts together.
"If employees default into quality, smart investments, they do not need to actively manage their money," he said.
The largest gaps are in the small and mid-sized 401(k) plans since the fund selections are not as good and no advice is provided since it is not cost effective for advisers to reach out to every employee to give personalized advice, Roy said.
"Investing is intimidating to the majority of people," he said. "It's complicated and there is so much noise. Most people don't know what to do and they tend to do nothing. The gap can be addressed with the benefits of technology with services like Jemstep that can provide personalized, objective advice."
Employees should avoid rebalancing their portfolios too often, said Robert Johnson, a professor of finance for Heider College of Business at Creighton University in Omaha.
"My advice to anyone saving for retirement is to make the maximum possible annual contribution to their 401(k) and not actively monitor the investment," he said.
Instead, individuals should establish a target asset allocation that is consistent with their objectives and risk tolerance and consistently fund their retirement account, Johnson said.
"For most investors, simply investing in a large capitalization index fund for the stock portion of their portfolio is most appropriate," he said. "There are many S&P 500 index funds that charge extremely low fees. The most efficient way to build wealth for the majority of individual investors is to follow a strategy of dollar-cost averaging by regularly purchasing shares in a large capitalization stock index fund or ETF."
Actively monitoring a retirement account plays to investors' inherent behavioral biases, Johnson said. In bear markets, investors often get "very scared" and move assets from equities to bonds or money market securities. In bull markets, investors often get very overconfident and move money from bonds and money market securities to stocks.
"Unfortunately, investors tend to follow a herd mentality," he said. "They end up 'buying high and selling low' exactly because they do monitor their investments."
An investor's target asset allocation should not change because of market conditions, Johnson said.
"It should change because an investor's personal circumstances have changed," he said. "One of the most dangerous places to attempt to learn about the process of investing is by monitoring the 24-hour financial news networks. They often give the impression that short-term trading is what investing is all about. Short-term trading is speculation."
--Written by Ellen Chang for MainStreet