If you function for a company that has a 401(k) plan, congratulations. Retirement plans certainly aren’t getting better with each brief year. You’ve probably wondered how your 401(k) compares with other company plans. Are you missing out on free retirement well-heeled because you’re not working for the company down the road? To help us find the answer, we looked at 401(k) benchmarking data, let something be knew in 2014.
Eligibility
According to data, 62% of employees can contribute to their company’s 401(k) plan with their primary paycheck. It’s fewer for companies that provide matching contributions. About 46% of companies that offer the marriage give it to employees when they start; another 29% require that they have one year of amenities before it begins.
Key Takeaways
- The average matching contribution is 2.7% of the person’s pay.
- The most common match is 50 cents on the dollar up to 6% of the worker’s pay.
- Some employers match dollar for dollar up to a maximum amount of 3%.
Match Amounts
Companies don’t match an unlimited amount. In other words, you can’t donate half of your salary and watch your company match all of those funds.
The majority of companies offer some assort of matching contribution for an average of 2.7% of a person’s pay, but there are many formulas out there. The most common match was 50 cents on the dollar. For every $1 you donate to your company 401(k), your company will contribute 50 cents. About 40% of companies play a part 50 cents for every dollar employees contribute up to 6% of their pay. Another 38% match employee contributions dollar for dollar, but the peak is normally lower — commonly 3%.
Although the maximum amount the company could pay the employee is the same with each of those drawings, under the most common option the employee has to contribute more to get the maximum company match. Depending on the quality of the 401(k) layout, that could work to the disadvantage of the employee, because he or she could be forced into less-than-stellar investment vehicles with high control fees.
Managing Your Plan
In fact, most plans now offer an average of 19 funds, most of which are actively governed domestic and international stock funds. The next most common are domestic index funds. The more options readily obtainable to you, the better your chances of finding a well-performing option with low fees. You should never turn down without cost or obligation money as long as most of it is remaining in your account.
What good is a match if you don’t have the knowledge and experience to swear in the money into the best funds in your plans? About 35% of plans had somebody who would offer investment communication to their participants, but only about 18% of the employees put the advice they received into action.
An increasing amount of plans are donation a
The Bottom Line
The most common employer match is 50 cents on the dollar of up to 6% of your salary. Myriad advisors recommend contributing enough to get the maximum match. Turning down free money doesn’t make import unless the fund is so bad that you’re losing most of it to fees and substandard returns. As with any choices related to your retirement, talk to a monetary advisor who won’t make money depending on the fund for which you sign up. Look for a fee-only advisor.