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You already know the scary stuff: Most workers don’t have enough money set aside for retirement, and others haven’t even started saving yet. And those who did their homework and stowed away some cash probably lost a chunk of it when their portfolios were hit during the Great Recession.
But two new reports show that the times may be changing, albeit slightly. The average 401(k) balance dropped 34.8 percent in 2008 but rose from 2009 to 2011, according toan October 2013 study from the Washington, D.C.-based nonprofit Employee Benefit Research Institute (EBRI), which advocates for the development of sound employee benefit programs.
The median 401(k) account balance increased at a compound annual average rate of 11.5 percent from 2007 to 2011, to $42,082 at the end of 2011, according to EBRI. And many participants in EBRI’s “consistent” group, or those who had 401(k) accounts every year during the 2007-2011 time frame, had sizable savings: 13 percent had more than $200,000 in their accounts, and another 15 percent had between $100,000 and $200,000.
Elsewhere, thelatest annual survey by the Chicago-based Plan Sponsor Council of America (PSCA)—anonprofit advocate for retirement security—showed that employee participation rates and company contributions to 401(k) plans have increased steadily during the past two years. Nearly nine in 10 eligible employees (87.6 percent) have a 401(k) balance in their company’s plan, and participants are saving an average of 6.8 percent of pay, up from 6.2 percent in 2010, according to PSCA.
Why might this be important for HR professionals? Because in a period of weak salary growth, when most workers cannot expect a big raise from the boss or a significant bump if they switch jobs, benefits packages have become a popular tool for retention and recruitment practices. Research by the Society for Human Resource Management (SHRM) has shown that financial/retirement planning has been a driving part of this strategy, which should be no surprise, given the scores of workers trying to shore up their nest eggs.
According to a January 2013 SHRM survey, nearly one-third of HR professionals (29 percent) said their organization used its benefits program to recruit employees. From that group, 63 percent said they highlighted their company’s retirement-savings and planning benefits to entice potential new hires. What’s more, 76 percent of respondents said these benefits would be more important for recruiting in the next five years.
A related SHRM survey, from January 2013, revealed similar results: Of the HR professionals who emphasized benefits to retain employees, 58 percent cited retirement savings and planning for retention strategies, and 70 percent said those benefits would become increasingly important for keeping workers on board in the next five years.
For more information, visit SHRM’s Labor Market and Economic Data page.
Joseph Coombs is a workforce trends and forecasting specialist for SHRM.
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