Kerry Hannon at Yahoo Finance reported on employers trimming 401(k) matches even as more than 8 in 10 say retirement benefits are important for recruiting. The average match still runs about 4.5% of pay according to Vanguard, but availability has softened, and workers are worried. Kerry asked me what to do if your match shrinks.
A drop in employer match availability sounds like a crisis, but the real story is that most workers are not capturing their employer's match in the first place. The bigger loss is happening in plans where the match is still there and the employee is contributing below the threshold to earn it.
If your match shrinks, the answer is not to panic. It is to raise your own percentage deferral rate to fill the gap. Set your salary deferral to capture every dollar of match your employer offers first, because that money is part of your compensation. Then, if you can, raise it a bit more so your total savings rate stays where it was before the match changed. Your retirement does not know whether a dollar came from you or your employer. It only knows whether the dollar arrived.
A benefits change is an invitation to look at the number you actually control, which is your own contribution rate.
Read the full article at Yahoo Finance →
