Q: Is there a relationship between automatic enrollment and employer decisions about matching contributions and total compensation?

A: Recent research by the Center for Retirement Research at Boston College (CRR) found that auto-enrollment is related to relatively low employer match rates and default rates, but not overall compensation. The How Does 401(k) Auto-Enrollment Relate to the Employer Match and Total Compensation? report indicates that auto-enrollment plans had a matching rate of about 0.4 percentage points less than plans without auto-enrollment, even taking into account other factors.

The researchers also investigated whether low-default contribution rates adopted by employers who have auto-enrollment in their plans. It appears that employers who have this feature may be using a relatively low default rate, with resulting lower matching, to offset the higher costs that occur from higher participation rates found in auto-enrollment plans. 
The study concluded that auto-enrollment increases saving for workers who would not have participated in the plan without that provision. However, employees who would have participated in the absence of auto-enrollment may, over time, save less because of relatively low employer match rates.

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The good news is that the Participant Deferral Rate rose slightly year on year.

The average participation rate in 401(k) plans was 88% at the end of 2012, according to the 56th Annual Survey of Profit Sharing and 401(k) Plans by the Plan Sponsor Council of America (PSCA). The rate is defined as the average percentage of eligible employees who had a balance in the plan, as the average number of investment choices offered to participants remained at 19 across all employer plans.

The year before the rate was 86%. An average of nearly 81% of eligible employees made contributions to the plan in 2012. The average participant pre-tax deferral rate was 6.8%, compared to 6.4% the year before.  Here are some highlights:

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Like every other important investment in your life, a fresh spring look can help you make small but important adjustments that pay off down the road.

Spring has finally sprung for most of the country after what was a winter to remember.  What better time to take a good look at your 401(k)-type plan. Here are three simple tips:

Make A Rational Use of the Menu of Funds. Just because your plan offers 30 choices doesn’t mean that you have to invest in every fund. More is not better when arriving at
diversified allocation.

But how much do you put in each fund? Some people are naïve about diversification. If they have 10 selections, they invest 10% in each, which may sound rational, but isn’t.

Instead, split your money between stocks and bonds according to your age. Your percentage in income investments should roughly each your age. If you’re 25, for example, then 25% should be in bonds.

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It’s happening to an increasing number of people of a certain age. It happens late in the prime of working life and just when you think you’ve got a solid nest egg for retirement, you lose your job.

Losing a job late in life is not a rare experience; older workers find more challenges than their younger counterparts in trying to get back to the workforce, if ever, and certainly not at their
previous level.

“I have seen an alarming number of my friends’ parents being laid off,” says Kelley Long, a spokeswoman for the National CPA Financial Literacy Commission, certified financial planner and director of communications and marketing for Chicago-based accounting firm Shepard Schwartz & Harris.

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First, congratulations! If you believe the statistics consider yourself lucky to have overcome seriously competitive odds.  This real opportunity lets you put in place a few basic retirement goals.  The earlier you do it the easier it gets.

College graduates who are about to begin their careers will face an overwhelming number of financial choices, including how best to save for retirement.

The newly employed have one or more retirement account options from which to choose, including Roth IRAs, traditional IRAs, and traditional 401(k) plans, that may or may not have a Roth 401(k) option, say the authors of a new paper on the subject.

Many young workers likely have employers that provide a matching contribution, according Gregory Geisler, an associate professor of accounting at the University of Missouri Saint Louis and Jerry Stern, a professor of accounting at Indiana University-Bloomington.

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Decades ago, workers could count on a company pension, Social Security and Medicare to carry them through retirement. Today’s retirees may need to rely more on personal savings.

There’s something both powerful and serene about seeing hot-air balloons rising in the morning stillness, their burners propelling colorful shapes into the atmosphere. Retirement is a lot like untethered flight—life’s possibilities are limited only by your imagination and where the wind takes you. At one time you could count on the three “balloons” of a pension, Social Security and Medicare benefits, but you will likely need to rely more on your personal savings to fund your dreams once you retire.

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When Gladys retired from the phone company in 1997 at age 60, she was very happy with her $800-per-month pension and the $1,200 per month she was earning from certificates of deposit. Her monthly expenses were about $1,500, which left enough for an occasional trip.

Fifteen years later, Gladys is still collecting $800 per month from her pension, but only $900 a month in interest from her CDs. Her monthly living expenses now are $2,400, and she has been dipping into her principal to cover the difference. She’s justifiably anxious about outliving her money.

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