More than a third (38 per cent) of U.S. employees increased their 401(k) contributions by an average of three per cent in 2021, according to a new survey by Fidelity Investments Inc.
By the end of 2021, 83 per cent of workers with a 401(k) received a contribution from their employer, with the average employer contribution reaching US$4,080. Three-quarters (75 per cent) of employees who contribute to a 403(b) plan received a contribution from their employer and 34 per cent increased their own contributions in 2021. More than half (53 per cent) of generation Z and 38 per cent of women increased their retirement plan contributions last year.
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Among employees who left their job in 2021, 23 per cent rolled their savings into an individual retirement account, while 18 per cent decided to leave their savings with their previous employer and 15 per cent moved their money to their new employer’s 401(k) or 403(b) plan. Slightly more than a fifth (22 per cent) of these respondents said they’re planning to do something with their savings but haven’t taken any steps yet, while just six per cent cashed out their retirement savings.
More than a third (38 per cent) of employers said their 401(k) includes auto-enrolment. A similar percentage (37 per cent) of this group said they’ll sign up new employees at a contribution rate of five per cent or higher, up from 28 per cent five years ago. Only nine per cent of employees who are automatically enrolled in their 401(k) plan decided to opt out.
A small percentage (eight per cent) of employees who are contributing to a 401(k) decreased their deferrals in the fourth quarter of 2021, compared to nine per cent the year before and seven per cent in the third quarter of 2021. Roughly two-thirds (65 per cent) of deferral increases in the fourth quarter were due to auto-increase programs.
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In addition, the survey found three per cent of workers made a withdrawal from their 401(k) — including hardship withdrawals — in the fourth quarter, down from six per cent in 2020, but up slightly from three per cent in the third quarter and two per cent in the first quarter of 2021. The vast majority (85 per cent) of gen-Zers said they’re 100 per cent invested in a target-date fund, followed by 70 per cent of millennials and 51 per cent of gen-Xers.