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| 401(k) Balances Reach Five-Year High |
| Fidelity Investments reports that 401(k) accounts reached a five-year high, increasing on average from $55,000 in 2003 to $61,000 in 2004. In reviewing almost 8.6 million participant accounts, the investment giant found that 66% of those eligible workers elected to contribute to their retirement plans last year. "We are encouraged by the key results in this year's report," said Steve Deschenes, executive vice president of Fidelity. "The data indicate that workers continue to view their 401(k) as a popular retirement savings vehicle, and on average are seeing higher account balances as a result."
But, the current rate of savings isn’t enough. The typical U.S. household will have to make do on 59% of its pre-retirement income. Eighty-five percent of pre-retirement income is recommended. Researchers also found that one-third of eligible workers are not currently participating in employer-sponsored 401(k) plans. It’s not for lack of knowledge, surveyors say. “Low savers” lack the motivation and the discipline to invest. Want to help your workers invest more? Fidelity offers the following tips to jump-start employee savings: 1. "Evaluate plan demographics to gain insight about your employees' retirement needs. 2. Adopt plan programs and features specifically designed to encourage plan enrollment. 3. Add an annual increase program to automatically increase individual savings rates. 4. Implement catch-up provisions to increase eligible participants' retirement savings. 5. Offer lifecycle funds to help participants turn over asset allocation decisions to the professionals. 6. Add automatic rebalance or rebalance notification to help participants maintain the right investment mix. 7. Provide an investment advice and managed account offering to meet the needs of individual investors. 8. Personalize communications to drive participant actions. 9. Benchmark your participants' progress against their retirement savings goals to drive optimal investing behaviors. 10. Provide retirement income planning resources to help participants better manage their retirement investments." "Today's employers have an unprecedented set of tools and resources at their fingertips to help improve employees' retirement readiness," said Deschenes. "It's crucial that plan sponsors gain insight from their provider or an advisor into the evolving needs of their participants and provide them with a combination of features that drives them to take action." |
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