401(k) matches making a comeback

After leaving employees to fend for themselves with retirement savings plans in the 2008 financial crisis, companies are now giving employees extra money to stash away for their futures in 401(k) plans.

Companies have been restoring 401(k) matches abolished amid frantic cost-cutting during the financial crisis and recession.

Matches are considered powerful incentives to get people to save money every payday, because matches are often worth hundreds or thousands of dollars in extra pay a year per individual.

Charles Schwab reported recently that those offering matches are back to precrisis levels.

Schwab studied plans of about 1,000 midsize and large employers and found that 73 percent were providing matching money. That compares with 67 percent in 2009. In 2008, about 72 percent of companies had been providing matching money.

Besides offering matches to stimulate participation, companies are also adding advice so employees contribute more toward their future and invest correctly.

Despite research that shows people are worried about their financial futures, “it’s a challenge to get people engaged” with 401(k)s, said Steve Anderson, head of Schwab Retirement Plan Services. Personal advice can change that, he said.

Research by Aon Hewitt has shown that about half of workers in their 20s pass up 401(k)s even though that means they miss out on the matching money their employers would give them.

And research done by Financial Engines has shown that when left to their own devices, only about a third of people with 401(k) plans invest money the way they should based on when they intend to retire.

To help fight inattention and mistakes with investing, Anderson said about 83 percent of employers in Schwab’s study are offering advice, about double the 2005 numbers. In addition, to ensure that more people participate in 401(k) plans, about 42 percent of companies are automatically enrolling employees in their retirement plans.

With such an approach, employees are allowed to opt out of the 401(k) if they request it, but few do. Research suggests that people are carried along by inertia, contributing to 401(k) plans if they are placed into them automatically but skipping the plans if they must initiate enrollment themselves.

Anderson said that when people are getting advice with their 401(k)s, they tend to stick with the investment plan that was recommended to them before a stock market decline.

More in Herald Business Journal

Snohomish County’s campaign to land the 797 takes off

Executive Dave Somers announced the formation of a task force to urge Boeing to build the plane here.

For modern women, 98-year-old rejection letters still sting

In a stark new video, female Boeing engineers break the silence about past inopportunity.

‘Not surprising’: FCC repeals net neutrality rules

Internet service providers will be free to slow down competing services and sell faster speeds.

Disney buying large part of 21st Century Fox in $52.4B deal

Before the buyout, 21st Century Fox will spin off the Fox network, stations and cable channels.

Commentary: GM, Boeing fight a war of words over Mars

Boeing is strongly signaling how crucial deep-space exploration is to its future.

Angel of the Winds pays $3.4M for Everett arena naming rights

The casino replaces Xfinity as the lead sponsor for the publicly owned downtown Everett events center.

Delta orders 100 Airbus A321neo jets valued at $12.7 billion

Boeing had hoped to land the deal, offering comparable 737s.

Rubio to vote against tax bill if child credit isn’t expanded

Sen. Bob Corker announced that he would vote against it due to concerns on the federal deficit.

Tulalips break ground on new Quil Ceda Creek Casino Hotel

A 150-room hotel was added to what is now a $140 million complex expected to open in spring 2019.

Most Read