Traditional pensions have gradually died away like long-lost dinosaurs of the retirement savings world with 401k plans emerging as the primary way Americans are saving for their golden years. What was once a secondary option for retirement savings with a lot of employers is now much more prevalent. According to ForUsAll:
The switch from pensions to 401(k)s has been so thorough that 73% of employed workers reported they were offered a defined contribution plan by their employer.
With so many working adults now having a 401k plan of some form as part of their assets, what does this mean for the future of retirement savings, and how could HR processes change because of it? Here's a look at a few statistics that will give you a snapshot insight into what the 401k industry could be expected to do over the coming years.
Automatic Enrollment Helps Boost 401k Participation
Employees who have automatic enrollment options are more likely to start participating in 401k plans, but this is especially evident with employees who are under the age of 25. The participation rate with automatic enrollment is around 90 percent overall, but when you take auto-enrollment out of the equation, participation rates drop drastically to just 63 percent. For those workers under 25, 90 percent of them will join a 401k plan if they are automatically enrolled, but if not, only 27 percent of them will participate.
Millennials Utilize 401k Differently Than Older Generations, But They're Smart
Enrollment numbers can be lagging among millennials, but that does not necessarily mean the younger generation is doing things wrong. Those who are saving with a 401k plan — about 59.4 percent of them — are being more attentive to saving more money than their older counterparts. According to a study by a unit of Wells Fargo, these millennials are building their 401k accounts fast enough and big enough to duplicate 66 percent of their pay if they quit work at age 65 and start to take Social Security benefits.
Investment Options Offered by 401k Providers Have Remained Steady
One thing that really has remained fairly stable over time is the number of investment options that providers make available to enrollees with their 401k plans. The magic number is something close to 22 investment options with most providers, and this number really hasn't changed much since 2006, according to BrightScope.
People Tend to Contribute More to Their 401k Closer to Retirement
It's a fairly natural thing to look at retirement as something way off in the future that you don't really have to worry about when in your 20s. However, as people get older, they do start to contribute more. People between the ages of 50 and 59 most often contribute around 10 percent of their income, and if that same employee works beyond 60, he will likely contribute closer to 11 or 12 percent, according to Smart Asset. In general, workers are staying in the workforce longer than they once did since life expectancies have changed, and those who do stick around and continue working typically allocate more of their paycheck to retirement savings.
Do you want to offer a 401k plan to your employees, but don't know where to start? Contact us today to learn more about how we can support you and your employees.