No Account: Just because some employees make more money than others doesn’t
mean they are contributing more to their company 401(k) plans, according to a
recent study by Watson Wyatt Worldwide.
Only one in 10 employees who earn more than $100,000 annually participate in
their 401(k) plans, according to the study, which was based on responses from
300,000 workers at 32 large employers with 401(k) plans.
Lower-earning workers participate at a higher rate, but they don’t save
enough. Fifty-two percent of employees whose annual wages are between $10,000
and $25,000 do not participate in their 401(k) plans. And of those who are
participating, most are only contributing 6.2 percent of their salaries,
although by law they could contribute more, according to the study. Workers
earning at least $100,000 are contributing almost 10 percent of their
salaries.
The study’s most disturbing finding for employers might be that even
employees who have been with their companies for more than 20 years haven’t
accumulated large account balances. Two out of three workers making $10,000 to
$25,000 annually have accumulated less than a year’s pay in their 401(k)
accounts. Similarly, one out of four workers making more than $75,000 annually
have 401(k) accounts that are worth less than one year’s pay, the study
says.
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