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About 42 percent of Americans have less than $10,000 saved for retirement — they need to save more.
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One way to boost savings is to enroll in an effective 401k plan.
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A Wells Fargo report found that there are four key features of 401k plans that produce the most positive results.
If they had to retire tomorrow, many Americans wouldn’t be ready. That’s the main conclusion from a recent GOBankingRates survey, which asked Americans how much they had saved for retirement. More than 42 percent said they had less than $10,000 saved, including 13.7 percent with nothing.
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There’s a simple reason why many Americans can’t save more — they’re not earning enough. Another GOBankingRates survey about Americans’ investing habits found that 55 percent of people who aren’t investing just don’t have the money to do it.
Find out what’s keeping Americans from saving more money in each state.
Fortunately, the right 401k plan can help you meet your retirement saving goals. A new study from Wells Fargo Institutional Retirement and Trust — the 2018 Driving Plan Health report — analyzed the most effective 401k plans for helping employees accrue the savings they need to replace 80 percent of their income in retirement. What it found could help companies as they shape their 401k plan policies.
401k Features That’ll Boost Your Savings
The key findings of the report determined 16 features of the best — or “high influence” — 401k plans, and saw that these plans employ a combination of the features to boost employees’ savings. Out of these 16 features, four produced the most positive results:
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Automatic enrollment: When employees are enrolled automatically in the plan with a paycheck deferral rate of 6 percent and are automatically re-enrolled, savings increase.
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Automatic deferral increase: If employees have to opt out of deferral increases from 6 percent to 10 percent, they save more.
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Diversified investment offerings: Plenty of examples exist, such as target-date funds.
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Above-average company match: This includes at least a 5 percent match or profit sharing. A 3 percent match is what companies typically make.
Related: Your 401k Could Make You a Millionaire — Here’s How One Man Did It
Thus, in addition to self-education and discipline, Americans can boost their savings even more by taking the right approach to their 401k plans. Recent historical trends show Americans are improving their 401k habits.
The Wells Fargo report found that from 2012 to 2017, more employees — a 42 percent increase — met all three of the fundamental behaviors of saving: