Saving up for retirement has never been more of a concern for employees. According to a study by the Society for Human Resources Management, 43 percent of workers indicated they would prefer a lower salary in favor of a greater contribution to their 401(k).
"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 in a comment on the report. "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."
When companies match their employees 401(k) at any level, it is sending a message they are willing to help their workers get to a safe economic place before retirement. A study by the Employee Benefits Research Institute reported by the Washington Post indicated that when employees in their late 20s begin to save money into their 401(k), they will have 6.8 times their final salary by 65 years of age. Forty percent of that money would come from an employer match.
Retirement is obviously the responsibility of workers, but it helps to have human resources take a position of helpfulness towards those who would begin saving. Teresa Hassara, executive vice president at TIAA-CREF, recommends that employers speak with employees about enrolling in the 401(k), increasing contributions every year and checking asset allocations every year to ensure a good balance is met. Hassara even went so far as to recommend auto-enrollment and auto-escalation options for overcoming any employee reluctance to begin saving money.
Other matters to consider when providing a 401(k) to employees
Some workers take out loans against the value of their 401(k), according to USA Today. About 22 percent of those with a Fidelity 401(k) are borrowing against their savings. Oftentimes when they begin this process, they reduce their savings rate, and about a third of employee investors who take out a loan stop contributing to their 401(k) entirely.
"They're almost treating their 401(k) like a checking account," said Jeanne Thompson, vice president of thought leadership at Fidelity. "If you're never paying a loan off in full, you're constantly playing catch-up."
Although employers can't tell their workers what to do with their money, some education about what a 401(k) can and can't do would help – particularly, those who are in fields that didn't require a lot of financial courses in college, such as people in creative, technological or engineering professions, may benefit from information packets or short lectures about safe spending habits and good ways to save money.
Many people – especially young people – don't really know how their 401(k) works. Some education would go a long way to ensuring people continue putting money into their savings for retirement.
Whether or not to roll over a 401(k)
Deciding whether or not to roll over your 401(k) is a challenging matter, according to MarketWatch. When people are considering a roll over, they must decide whether to stay put, such as when the investment options are good and the prices are low, versus when to roll in, which means putting an old balance from a previous job into a new account, or whether finally to rollover – to put funds from an old account into a Roth IRA.
While some people might benefit from a rollover, it is very particular to certain situations and certain times of life. People under the age of 59 and a half face a 10 percent penalty if they withdraw their money ahead of time.
The key issue is ultimately to keep employees informed about their options, and provide experts who can guide them through these complex matters.