Editor’s Note: This story originally appeared on NewRetirement.
We are supposedly in the midst of the “Great Resignation.” Record numbers of Americans are quitting their jobs.
Some are retiring. Most are seeking a better gig. And employers are responding with higher salaries and better benefits. Retirement savings plans like 401(k)s are getting beefed up as employers scramble to hire and retain people.
Explore what’s new in company benefits. Would a better retirement savings benefit or other employment perk tempt you to delay retirement and work longer? Here are some factors to consider.
Retirement Savings Are More Important to People Now
The pandemic seems to have increased awareness of the importance of retirement savings.
Sixty-eight percent of people say they now prioritize building up their retirement savings more than they did before the pandemic.
More Companies Are Now Offering 401(k) Plans
A 401(k) plan is a tax-advantaged retirement savings vehicle offered by employers. Typically employees can opt to have money withheld from their paycheck to be invested in the 401(k). Employers can also match employee contributions, essentially offering the worker additional compensation beyond their salary.
With retirement savings becoming more important to employees, employers seem to be responding. This year, 34% of the survey respondents say that their employer has recently introduced a 401(k) plan.
The NewRetirement Planner now enables you to model 401(k) matching from your employer. The new functionality enables you to link your retirement savings to your work income. This powerful enhancement makes your retirement plan more accurate and easier to maintain.
Companies Are Improving Their 401(k) Plans
The Wall Street Journal reports that many companies are beefing up their 401(k) offerings in 2022:
- 16% of large and midsize companies plan to increase their matching or revive suspended matches in 2022.
- Another 8% say those options are under consideration.
- The combined total is up from 12% in 2021.
How Much Is a ‘Good’ 401(k) Match?
Analysis from 2019 found that the average employer match is 4.3%. However, companies have many different formulas for determining their match.
The most common match, used in 2019 by 71% of companies, was 50 cents on the dollar up to 6% of your pay. This means that if you are earning $100,000, the employer will contribute 50 cents for every dollar you save up to $6,000. (The employer will have contributed $3,000.)
Some employers (21%) match dollar for dollar. So, if you save $1, the employer will contribute $1. However, in this formula, the maximum contribution the employer will make is lower, typically around 3%. (So, the total contribution is still only $3,000 on a $100,000 salary.)
There are also differences in when employer match kicks in. Sixty-eight percent of employers allow you to participate in the 401(k) with the first paycheck.
However, for employers that provide matching contributions, only 56% give the match in the first month and 24% require a year of service before the matching kicks in.
Workers Are Willing to Switch Jobs for a Better 401(k)
A study from Betterment Business found that access to a high-quality 401(k) or other retirement savings plan and a matching program are the most important financial wellness benefits a company can offer employees.
And, the survey also found that 74% of employees could be enticed to jump ship to a different job with a better 401(k) plan.
401(k) Matching Represents Real Money
401(k) matching is when the employer contributes an amount that matches what the employee saves into their 401(k).
So, if you are investing 3% of your $100,000 salary into a 401(k), the employer is also investing $3,000 into the tax-advantaged account. So, your savings are doubled, and your total compensation from the company, including the 401(k) benefit, is $103,000.
Benefits Typically Make Up 30% of Your Total Compensation
You probably think of the dollar value of your compensation as your salary. However, according to the Bureau of Labor Statistics, your paycheck typically only represents about 70% of the monetary value you get from your employer.
Benefits like 401(k) matching, health insurance, and other perks are another 30%.
Think about this if you are looking for a new job and be sure to compare total compensation, including benefits, between different offers you might receive.
New Benefits Being Introduced Beyond Insurance and 401(k) Savings
In an effort to woo employees in this tight labor market, employers are beefing up real compensation like 401(k) matching as well as other new monetary and other kinds of benefits. Benefits you might see more of now include:
Paid time off and flexible work schedules: Paid time off (PTO) is time your company will pay you for, even if you are not working. Companies are increasing the amount of PTO they offer, acknowledging that people have multiple demands and are likely to do better work if they aren’t stressed out by everything else they need to do.
Wellness benefits: Gym memberships, onsite COVID-19 vaccinations, and meditation apps are all examples of perks that employers are offering employees in an effort to keep them healthy, happy and working.
Work from home: Many employers are finding that offering at least the option to work from home is a non-negotiable benefit. A FlexJobs survey found that 96% of workers want to continue to be remote in some capacity, with 65% desiring to stay remote full time.
Mental health resources: One study found that 32% of employers have increased resources for mental health benefits since the pandemic began.
Child care: The pandemic was particularly hard on working parents. Employers are responding with child care packages for employees.
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