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Lower Pay In Exchange For A Higher 401(K) Match? Many Workers Prefer the Match, According To Fidelity® Survey
Nearly 80 percent of companies offer employer contributions in their 401(k) plan; now is the time to make sure employees are not leaving money on the tableBoston - Fidelity Investments® today released survey results that show many U.S. workers still value employer contributions – such as profit sharing or a 401(k) company match – as one of the most important components of their benefits offering. More than four out of 10 workers surveyed (43 percent) indicated that, if offered, they would prefer to have lower compensation in return for a higher employer contribution to their 401(k).
The study focused on various compensation scenarios to determine how much value employees place on a 401(k) company match when making decisions about new job opportunities. According to the survey, workers were more likely to accept a position that had a company match as part of its overall compensation package – only 13 percent indicated they would take a job with no company match, even if it came with a higher pay level.
“Employer contributions play a vital role in helping Americans reach their retirement savings goals – these contributions represent more than 35 percent of the total contributions on average to an employee’s workplace savings account,” said Doug Fisher, senior vice president of Workplace Investing at Fidelity. “Fidelity recommends a total retirement saving rate between 10 and 15 percent of salary to ensure employees will have enough for retirement – but many working Americans will only reach that savings level if their 401(k) contributions are complemented with a company match. Fidelity works with numerous employers to help design company match models that encourage employees to save at a level that will help them reach their retirement savings goals, as well as help plan sponsors achieve the desired outcomes for their workplace savings plan.”
According to the study, the 401(k) plan is the sole retirement savings vehicle for an increasing percentage of U.S. workers – 42 percent indicated they are not saving in any capacity outside of their 401(k). Yet personal and retirement savings are expected to fund a significant portion of workers’ retirement income. Fidelity recommends that individuals save enough to replace 85 percent of their net final pay, and more than half of that income is expected to come from individual retirement savings. As a result, employer contributions have become increasingly important, and a key factor in helping individuals meet their retirement savings goals.
Today, according to Fidelity 401(k) data, 79 percent of workplace savings plans offer some type of employer contribution (such as a 401(k) match or profit sharing), which covers 96 percent of Fidelity’s 13 million plan participants. As of June 30, 2014, the average employer contribution was 4.3 percent, and employers contribute an average of $3,540 per employee annually, which is more than $1,000 higher than the average employer contribution 10 years ago.
New technology positively impact employee contribution rates
Fidelity is helping companies encourage workers to contribute more to their workplace savings plan with products like Easy Enroll, which was announced in March and will be available this summer. Easy Enroll enables employees to select from one of three suggested savings rates when joining their company’s 401(k) plan. Employers can preset the suggested savings rates, so even if an employee selects the lowest rate presented, they likely will be enrolled in their plan at a higher rate than if they selected a percentage on their own.
Employees with multiple guidance interactions more likely to take action
Recent Fidelity research indicates that retirement savings guidance can have a positive impact on employee behavior and savings decisions. Fidelity found that nearly 40 percent of employees that reached out for help took some sort of positive action with their retirement savings account. However, that level increased to 63 percent among employees who reached out multiple times for help.
Fidelity’s long history and expertise in the retirement savings industry is evident in its Plan for Life participant guidance experience, which is designed to help employees address challenges and keep their retirement savings on track as they move through life’s various stages. Plan for Life is available to Fidelity plan participants across the nation using dedicated phone representatives, online tools, webinars and videos, and at Fidelity’s more than 180 investor centers nationwide.
About Fidelity Investments
At Fidelity, our goal is to make financial expertise broadly accessible and effective in helping people live the lives they want. We do this by focusing on a diverse set of customers: from 23 million people investing their own life savings, to 20,000 businesses needing help managing their employee benefit programs to 10,000 advisors and brokers needing technology solutions to invest their own clients’ money. Privately held and with 41,000 employees around the world, Fidelity is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products.
As of June 30, 2014, the company held assets under administration of $4.9 trillion, including managed assets of $2.0 trillion. It is one of the largest mutual fund companies in the United States and the No. 1 provider of both workplace savings plans and Individual Retirement Accounts (IRAs). For more information about Fidelity Investments, visit www.fidelity.com.
Fidelity Brokerage Services LLC, Member NYSE, SIPC