Retirement planning: Trends show an increase in 401(k) savings

NASHVILLE, Tenn. – July 4, 2019 – If you have 401(k), which is the retirement savings plan sponsored by an employer, you are one among the 100 million+ Americans covered by a defined contribution or (DC), plan. Those assets, along with individual retirement arrangements (IRAs), constitute 33% of all the household monetary assets in the United States; as per the Investment Company Institute.

Vanguard, which is a major 401(k) record-keeper disclosed that DC plans are the “prevailing” retirement plan which employers in private-sector in the United States sponsor. Almost 1 out of 2 private-sector employees are covered by such plans as many big companies like Advance Financial, MetLife, Cigna Corp, etc. have increased their 401(k) and other retirement plan contributions.

As per the consulting company Willis Towers Watson, “The old, but effective, retirement income equation which constituted of the conventional defined benefit (DB) pension plan payments, Social Security benefits, and Defined Contribution plan assets are no longer the usual strategy for most of the future retirees.” Nowadays, a greater number of retirement plan sponsors are offering only the Defined Contribution plan to the new employees.

This makes, employees accountable for their retirement security. An expected question to inquire about is how the participants did in the last decade because the market had hit the base on March 9, 2009. Fidelity Investments, a leading 401(k) provider, examined 1.64 million 401(k) accounts which continually invested in the same 401(k) plan for a decade. They have observed that the Millennials’ 401(k) accounts have seen a progressive increase in the last decade (1,762%), followed by Gen Xers (626%) and boomers (367%).

While you can’t benchmark these returns as they involve contributions, they say that millennials didn’t put an end to invest in equities. That’s crucial because the inclination is to go to cash whenever the markets deteriorate.

The current trends are also positive. Assets in individual retirement arrangements and 401(k)s are rising, and so are 401(k) balances. For instance, out of Fidelity’s 180,000 401(k) participants, more than $1 million are in 401(k)s. At the end of 2018, it was at 133,800. So, we can observe the significant rise clearly. In the same time span, Fidelity’s IRA millionaires moved from 138,800 to 168,100.

Besides, the contributions from employees are also increasing. Fidelity announced that in the Q1 of 2019, the average 401(k) employee contribution is humungous ($2,370), seeing a 15% rise from the previous year.

Speaking of employer contributions, they are also trending higher. Fidelity reported that, per employee, $1780 is the average 401(k) employer contribution as of now, which is a record high and a 6% increase from one year earlier. The average 401(k) employer contribution rate is a record high of 4.7% when interpreted into a percentage of salary. Fidelity also announced that the average total savings rate, combining both the employer and employee contribution reached a record high of 13.5%.

Capital Group says this is not surprising because “a great number of American companies in every sector have openly declared plans to increase their 401(k) and retirement plan contributions due to tax reform.”

As announced by Capital Group, some of the companies which have enhanced their matching contributions include Advance Financial, Visa, MetLife, Aflac, Nationwide Insurance, AutoNation, Mastercard, and Cigna Corp.

In 2018, other companies that have made added contributions to 401(k) plans include SunTrust Banks, F.N.B. Corp, American Express, and Hostess Brands. Both Advance Financial and Aflac enhanced the match and made added employer contributions.

Kevin Barry, president of Workplace Investing at Fidelity Investments, said in a release that, “As a supporter of retirement investing and investor education, I am a firm believer in 401(k)s. The key is education and action. He also said that “One of the vital aspects of a retirement savings strategy is ensuring you are contributing an adequate amount to reach your financial goals.

Obviously, many people are and if you’re one among them, I challenge you to advise other employees, said Sarah Arel, benefits manager of W.E. Aubuchon. “From our learning for so many years, everyday peer-to-peer conversation is vital if it revolves around an organization’s benefits and can be more compelling than written communication from our corporate office.

About Advance Financial:

Founded in 1996, Advance Financial is a leading fintech company based in Nashville, Tennessee. With more than 100 stores in Tennessee and online services in 13 states, Advance Financial provides fast lending decisions on line of credit loans and other financial services, 24/7/365. Recent recognition includes 2018 Inc. 5000 fastest-growing private companies (7 straight years); A+ rating by the Better Business Bureau; Nashville’s 4th fastest growing company (2018, Nashville Business Journal); Forbes Best Employers for New Graduates (2018); and, Indeed Top-Ranked Workplace for Compensation/Benefits (2018). For more, visit

Original source: Tucson