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Employer 401(k) contributions are at record levels right now

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Everyone likes free money. Everyone also wants to retire comfortably. So as employers increase the amount of free money put into employees’ retirement accounts, it’s not surprising that employees are taking full advantage of it.

Employer 401(k) contributions recently hit a record high, with the average employer kicking in 4.8%, according to a new report. loyalty report Analyzing your corporate retirement accounts.

And what’s more, a significant portion of the American workforce is doing the legwork necessary to get the most out of this perk — including Gen Z, a generation that continues to prove its financial literacy.

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what do the figures say

At many companies that offer 401(k) savings plans, employers will Match employees’ payroll contributions up to a certain percentage. For example, if you contribute 6% of your paycheck to your 401(k), and your employer matches up to 4%, you can add 10% to your account — while individually only up to 6%. Let’s do poning.

Employer matches can be an easy way to supercharge your retirement savings. That’s why experts recommend at least contributing enough money to your 401(k) to receive the full employer match. Otherwise, you are leaving money on the table.

Fidelity’s report, which focuses on the first quarter of 2023, was released on Thursday. In it, the financial services firm revealed that employer 401(k) contributions — which include matching as well as profit-sharing — rose from 4.1% in the first quarter of 2021 to a high of 4.8%.

Other insights from the report include:

  • 78% of workers are contributing to their 401(k) plans at a high enough level to meet their maximum employer contribution match.
  • The total savings rate, which included both individual and employer contributions, reached an average of 14%.
  • Gen Z workers (ages 18 to 25) continue to build strong retirement habits. Their 401(k) savings account balances are set to increase by 17% in the fourth quarter of 2022 — the most growth of any age group.
  • Individual retirement accounts, or IRAs, continue to grow in popularity. The total number of IRAs opened has increased by 11% since the beginning of 2022. Notably, the number of IRAs held by Gen Zers has increased by 25% during that time.

What does it mean

Fidelity attributes much of this growth to a massive hiring spree during the first half of the year. As employers add jobs, “Americans are focused on investing in their future,” the company said in a News release,

In fact, over the past year, Americans have faced plenty of turmoil, from inflation to stock market volatility to wage stagnation. Even publicly funded retirement programs like Social Security continue to take a hit, with many retirees complaining of very low payout adjustments and a $1.3 trillion shortfall that could affect future retirees. Is.

These issues and others may open the door for more Americans to focus their efforts on their 401(k)s and IRAs — and how they can maximize their employers’ support.

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More Than Money:

Investors are pessimistic about the stock market. this can be a good thing

More than half of Gen Z invest, and most started before age 21

Stock ownership is at its highest level since 2008

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