(402) 461-4893  preston@eladvisors.us
Mon - Fri 8am - 5pm
(402) 461-4893  preston@eladvisors.us
Mon - Fri 8am - 5pm
Hastings, Nebraska Financial Advisors

Have You Met Your Match?

Englund & Lindsteadt Financial Advisors > Blog > Have You Met Your Match?

Just how important is a 401(k) match to your employees? It appears to be top of mind, according to Principal’s 2021 Retirement Security Survey. The study’s results show that the match matters most, as the top retirement plan considerations of survey participants when considering a new job are as follows: employer match (91%), eligibility requirements (80%), vesting requirements (74%), investment options (73%) and withdrawal options at job change or retirement (70%).

Moreover, one in four respondents indicated that they were considering retiring from their job or looking for a new one over the next 12 to 18 months. In an especially tight labor market, this means employers need to do all they can to attract top talent to their organizations.

How Do You Stack Up? 

With employer match on the minds of workers, and many considering making a career move in the near future, it makes the following question all the more important: “What are your competitors doing to assist their workers in planning for retirement?” Here’s a roundup of some recent data on employer trends.

Employer contributions. According to U.S. News & World Report, the average 401(k) employee contributions for Vanguard retirement plans in 2020 was 7%, with employers contributing an additional 4% to their accounts. Still, total contributions continue to fall short of the goal of 15% of annual income frequently recommended by many financial advisors.

Match formulas. T. Rowe Price’s Reference Point benchmarking report of 674 retirement plans, published in June 2021 details the top five employer-match formulas for their defined contribution plans in 2020:

50% up to 5% (20%)

100% up to 3% + 50% up to the next 2% (19%)

100% up to 4% (12%)

100% up to 6% (11%)

100% up to 5% (9%)

Vesting schedules. XpertHr’s 2021 Employee Benefit Survey, as reported by CNBC, asked 452 U.S. employers how long their matches take to vest. Results were as follows: immediate (28%), one year (13%), two years (7%), three years (14%), four years (6%), five years (17%), six years (10%) and unknown (5%).

Show Them the Money 

According to CNBC, more than 40% of workers say it would take “a miracle” for them to be financially prepared for retirement. At this time, it’s advisable to look at your retention numbers and peruse your exit interviews. Are many human resource losses likely related to a perceived weakness in your retirement plan? Compare your defined contribution offering, especially in the above spheres, to what other organizations in your industry and area are doing. Because it’s more than likely that, if you don’t, at least some of your current employees will be in the near future.

Sources: 

https://www.troweprice.com/content/dam/ide/articles/pdfs/2021/q2/reference-point.pdf

https://www.cnbc.com/2021/09/14/36percent-of-americans-say-they-wont-have-enough-to-retire-report-finds.html

https://money.usnews.com/money/retirement/401ks/articles/how-much-should-you-contribute-to-a-401-k#:~:text=The%20average%20401(k)%20contribution,of%20their%20salary%20for%20r

https://www.cnbc.com/2021/06/17/most-workers-wait-years-for-company-401k-matches-to-vest.html

https://businessrecord.com/Content/Insurance-Investments/Insurance-Investments/Article/-span-style-font-weight-bold-Principal-span-Retirement-Security-Survey-Tight-labor-market-talent-competition-will-drive-2022/171/833/95977?s=1

https://landing.principal.com/financial-wellness/4-insights-consumer-financial-behavior

https://smartasset.com/retirement/how-much-in-401k-to-retire

For more information, please contact Preston Englund at 402-461-4893 or preston@eladvisors.us.

Securities offered through IFP Securities, LLC, dba Independent Financial Partners (IFP), member FINRA/SIPC. Investment Advice offered through IFP Advisors, LLC, dba Independent Financial Partners (IFP), a Registered Investment Adviser. IFP and Englund & Lindsteadt Financial Advisors are not affiliated.

The information given herein is taken from sources that IFP Advisors, LLC, dba Independent Financial Partners (IFP), IFP Securities LLC, dba Independent Financial Partners (IFP), and it advisors believe to be reliable, but it is not guaranteed by us as to accuracy or completeness. This is for informational purposes only and in no event should be construed as an offer to sell or solicitation of an offer to buy any securities or products. Please consult your tax and/or legal advisor before implementing any tax and/or legal related strategies mentioned in this publication as IFP does not provide tax and/or legal advice. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. Prepared by 3rd party.