Tags: 401k | savings | retirement | defined-contribution

WSJ: Companies Are Putting More Money Into 401(k) Savings Plans

Image: WSJ: Companies Are Putting More Money Into 401(k) Savings Plans

By    |   Monday, 17 Jul 2017 12:13 PM

Americans are notoriously unprepared to retire with enough savings, making many people entirely dependent on Social Security or unable to leave the work force. But some companies are helping their employees by boosting matching contributions to 401(k) accounts, according to The Wall Street Journal.

“The average company contribution to 401(k)s rose to an estimated 4.7 percent of employee salaries in 2016, up from 3.9 percent in 2015,” the newspaper reported, citing a study by fund giant Vanguard Group. “It was the highest percentage and biggest year-to-year jump since at least 2007.”

Microsoft Corp. and Host Hotels & Resorts Inc. are among the companies that are increasing contributions to employee retirement accounts.

“Some companies in certain industries say they need to spend more to retain the best employees and motivate staff,” according to the WSJ. “They also need to ensure that older, relatively expensive workers can afford to retire on time and make way for younger staff, retirement experts said. Employees who don’t have adequate nest eggs will stay in their jobs longer and add to a company’s overall health-care costs.”

Meanwhile, the average employee contribution to a 401(k) hasn’t budged from 11 percent in at least a decade because new savers tend to set aside money at lower rates. Retirement plans typically recommend that people save about 15 percent of their salaries each year to have a big enough nest egg for retirement.

The savings goal was one of the reasons Host Hotels, a real estate investment trust that owns properties run by big hotel chains, chips in more money. The company matches its employees with 50 cents for every dollar they save up to 8 percent of salary. That’s an increase from the prior 6 percent limit.

Meanwhile, more Americans are working past the traditional retirement age of 65.

About 19 percent of people 65 or older were working at least part-time in the second quarter of 2017, according to the latest non-farm payrolls report. The age group’s employment-to-population ratio hasn’t been higher in 55 years, before the U.S. enacted more generous health care and Social Security benefits starting in the late 1960s.

By 2024, 36 percent of 65- to 69-year-olds will be active in the job market, compared with 22 percent in 1994, according to the Bureau of Labor Statistics.

Healthy, well educated and highly skilled seniors who enjoy their jobs tend to be the least likely to need the money to retire. Other seniors are faced with few good job choices and live frugally off Social Security and savings in retirement, according to the National Bureau of Economic Research.

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Some companies are helping their employees by boosting matching contributions to 401(k) accounts.
401k, savings, retirement, defined-contribution
Monday, 17 Jul 2017 12:13 PM
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