EBNs sister title Money Management Executive reports that as Americans see their pay cut and 401(k) matches suspended, they are worried about their preparedness for retirement, according to a Hartford survey.
Thirty-four percent are either extremely or very worried about their ability to save for retirement, and 56% fear theyllhave to cut back on their contributions.
Tom Foster, Jr., retirement spokesman for The Hartford, says companies should do what they can to encourage workers to save, even if they cut back on matches, by sponsoring educational meetings on retirement savings, adopting automatic enrollment and promoting the Savers Credit that allows a 50% tax credit, up to $1,000, for low earners who make contributions to a defined contribution plan.
The good news is that Americans are thinking more than ever about retirement and the need to save for it, Foster says. The bad news is that they are finding it more difficult than ever to do something about it. Employers do have an opportunity to help.
The Hartford also finds that, 53% of workers expect their employer to either reduce or eliminate their matching contributions to their 401(k) plan. And while trends this year so far have borne out that fear reports show about one-third of employers have cut back or eliminated 401(k) matches, MME finds research from Charles Schwab reveals that companies have added plan features to increase participation and investment rates.
In fact, of the plans that Schwab manages, participation increased in 2008 to 77%, up from 73% from the year before, MME reports. Plans with between 500 and 1,000 participants displayed the highest participation rate (88%).
A majority of employers, 70%, continued to offer a 401(k) match in 2008, down from 78% in 2007. Of those that did offer a match, only 8% reduced it.
Sixty-two percent are now offering 401(k) advice, up from 58% in 2007. Lifecycle funds are now available in 65% of plans, up from 62%. Thirty-two percent of the 401(k) plans Schwab administers now automatically enroll participants, up from 24% in 2007, and 10% have automatic savings increases, up from 6%. Finally, 45% offer a Roth 401(k), up from 37% that did so the year before.
Our plan sponsor clients remain committed to 401(k)s even though many of them are facing budget constraints across their businesses, says Robin Alcorta, vice president of 401(k) plan services at Schwab. While we are seeing some employers that have had to make cuts, including on the employer match, most have indicated that they intend to reinstate these features just as soon as they can.
