Worker Education May Be Working.
Worried by the future of of Social Security, American workers are boosting contributions to their employer-sponsored 401(k) plans. In 2004, their contributions went from an average 8.4% to 9.9% in 2005, according to a new survey ((news release (pdf), full 71-page report (pdf)). Meanwhile, employees saving for retirement outside the workplace rose to 66% in 2005 from 58% in 2004.
In addition, more employees are rolling over their fattened retirement savings into new accounts when changing jobs, according to another analysis (pdf).
The number of employees depositing lump-sum distributions into tax-qualified savings plans doubled to 43% in 2003 from from 19% in 1993. About a quarter spent any of their lump-sum distribution on new consumption in 2003, down from 38% in 1993.
“All the education efforts of employers over the last five years are starting to pay off,” said Craig Copeland, spokesman for the Employee Benefits Research Group, authors of the 10-year Census study.
In 2006, you can expect contributions to climb further, when a federally mandated default directing employers to deposit relatively small amounts of $1,000 to $5,000 into IRAs takes effect, Copeland added.