Retirement savings: It's your responsibility
As some employers shrink retirement offerings, consider these moves to help grow your nest egg.
Saks, Starbucks, Motorola, Sears. These are just a few of the employers who have recently announced plans to change or freeze matching contributions to their employees' 401(k) retirement plans. More than three dozen companies have taken this step since last June, according to the Pension Rights Center, a consumer group dedicated to retirement security.Skip to next paragraph
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Despite the small number of companies, media attention has magnified concern that employer contributions may become a benefit of the past. It's a notion that retirement experts reject, however.
"During the last recession in 2001-02, a number of employers cut back on their 401(k) matches, but reinstated them when the economy recovered. And I expect the same in 2009," says Alice Munnell, director of the Center for Retirement Research at Boston College. "Reducing employer support for 401(k) plans is a recession-driven action, not a reflection of a shifting commitment to retirement support."
Last month, just 3 percent of companies reported reducing 401(k)/403(b) matches, according to a survey of cost-cutting measures at 117 firms. The poll by Watson Wyatt, a global consulting firm, also revealed that 7 percent were planning such action in the next 12 months.
"The number of respondents taking some type of HR action in response to the economic downturn – imposing hiring freezes [47 percent of companies], freezing salaries [13 percent] – is notable," says Lisa Arko, a senior retirement consultant for Watson Wyatt. "We counsel companies to take other actions, such as reducing job training or travel, before freezing 401(k) matches, as employees are extremely sensitive to their retirement security."
That sensitivity is reflected in another poll released this month by the National Institute on Retirement Security. It found that 83 percent of Americans are concerned that they will not have sufficient retirement funds when they retire. More important, 84 percent of employees listed employer contributions as the most desirable retirement-plan feature. In addition, most respondents (63 percent) wanted to control how they invested their 401(k) savings, yet 58 percent viewed 401(k) plans as "gambles," acknowledging that their lack of investment knowledge may risk their retirement portfolios.