The firm analyzed more than 20,000 401(k) plans with 12 million participants. It found that average employee contributions were up 7.3% over the last five years from $5,500 at the end of the third quarter of 2007 to $5,900 in 2012.
During that same period of time, employer contributions, including a 401(k) match and profit sharing contributions, increased 19% from $2,880 in 2007 to $3,420.
Some retirement savers have begun increasing their savings rates, with 4.6% boosting their rates in the third quarter and only 2.8% decreasing their rates during the same period of time.
The Fidelity study revealed that some 401(k) plans with features aimed at increasing savings and participation - including automatic enrollment in retirement accounts and automatic escalation in the amount saved - may, in reality, be causing employees to save less. New participants who were automatically enrolled in their employers plans only saved an average of 3.7% of their pay in the third quarter, while those without automatic enrollment saved an average of 8.4%.
This may be attributed to plans auto-enrolling participants at too low of a default deferral rate, such as the common 3 percent, according to a statement from Fidelity. Fidelity suggests plans adopt a 6 percent auto-enrollment default rate with an automatic escalation of 1 percent annually, up to 10 percent.
Meanwhile, Fidelity 401(k) participants experienced volatility in their accounts over the past several years themselves. The average Fidelity 401(k) was valued at $69,200 in 2007, before dropping to $50,200 in 2008 and then spiking to $64,200 at the end of 2009. By the end of 2010, the average 401(k) account balance was $71,500. It held $69,100 at year-end 2011.
Fidelity was not alone in seeing major losses and rebounds in its 401(k) balances. Vanguard participants average 401(k) balances dipped from $78,411 in 2007 to $56,030 in 2008. Balances rose to $79,077 in 2010, before dropping to $78,276 at the end of 2011.
TenetFinancialGroup.com (http://www.tenetfinancialgroup.com/plandesign.html) customizes a Self-Directed 401(k) plan, using prototypes it has developed for easier facilitation, or amend a pre-existing plan. The company is based in Benbrook, Texas.
Tenet Financial Group
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