A recent study from Fidelity Investments, the nation’s largest provider of retirement plans, has found that 44 percent of employers it survey plan to or have reinstated contributions to employees’ 401(k) plans. Of the 300 companies surveyed, about 8 percent had suspended or reduced contributions as of July 2009.
This great news shows that more companies are confident about their fiscal future. It’s also great news for employees who are looking to grow their retirement savings.
Contributions on the Rise
A number of companies found that as a result of the Great Recession, they were unable to continue making 401(k) contributions. However, with the economy slowly making improvements, companies are trying to restore this benefit.
Here are a few examples:
- GenCorp, a Sacramento-based government defense contractor, suspended its contributions in Feb. 2009, which consisted of 100 percent matching of an employee’s first 3 percent contributed and 50 percent of the next 3 percent. The company recently announced that it would reinstate the match in July, but instead of matching in company stock, it will match in cash.
- Morningstar, a financial services firm, saved $1.2 million in just one quarter and avoided unwanted layoffs by suspending 401(k) contributions. However, the company has phased contributions back in this year, contributing 50 percent of employee contributions up to 7 percent, instead of the 100 percent it previously matched.
- The Minnesota Opera suspended its 3 percent contribution to employee retirement but began contributing again this year. Now, the company contributes 1.5 percent but hopes to reinstate to the whole 3 percent.
A study conducted by nonprofit Profit Sharing/401k Council of America showed that after 15 percent of all companies had suspended or reduced their match last year, 46 percent plan to reinstate them by the middle of this year.
Employees Can Build Nest Eggs Again
The good news with all of the employer matches is that employees can quickly grow their retirement savings. It’s been tough trying to rebuild the nest egg after the recession, but this will put many employees on the right track. Here are some other ways to get it done:
- Open IRA account: When you open an individual retirement account (IRA) you benefit from tax advantages as well as an early-withdrawal penalty that work as incentives to hold your money in the account until you retire.
- Open savings/money market accounts: Another good way to save is to open high-yield savings and/or money market accounts to help grow your money over time.
- Diversify your investments: If you invest your money, it’s good to diversify your portfolio so that if you lose in one area, you still have your money in another.
The fact that employers are contributing to 401(k) accounts again is good news. So now it’s your turn to do what you have to do to grow your retirement savings yet again.