Contributions to 401(k) plans increased in 2010, underscoring increased efforts by American workers to improve their financial well-being, according to the Principal Financial Well-Being Index.
The index, which surveys American workers at growing businesses with 10 to 1,000 workers and retired Americans, is released quarterly by the Principal Financial Group, a financial services provider. In the fourth quarter 2010 index survey:
• 85 percent of U.S. workers who are eligible for defined contribution retirement plans reported that they are participating, up from 81 percent of workers in the fourth quarter of 2009.
• When asked what changes they have made to their 401(k) account because of economic conditions, 18 percent reported that they have increased their contributions vs. 13 percent a year earlier.
Meanwhile, 45 percent of workers and 43 percent of retirees are very concerned or extremely concerned about the future of Social Security. In addition:
• While a third of retirees (32 percent) view Social Security as their primary source of income, nearly half (48 percent) said it is a secondary source of income.
• Significantly, 69 percent of those working today expect Social Security to be a secondary source of retirement income.
When asked how they would manage if Social Security were to fail, 46 percent of workers said they would remain in the workforce longer, up significantly from 40 percent in the fourth quarter of 2007, the last time the survey question was asked. Twenty percent said they would phase into retirement, down from 26 percent in 2007, and another 14 percent said they would lower their standard of living, an increase of 4 percentage points over 2007.
"With mounting worries about Social Security, it appears that fewer workers are staking their future on the system and are considering alternatives, which for many means putting more money in a defined contribution plan," said Luke Vandermillen, vice president of retirement and investor services at The Principal. "On a positive note, it may be a sign the economy is improving that some workers are comfortable increasing their 401(k) contributions instead of dipping into retirement savings to cover daily expenses."
The fourth quarter index survey of 1,159 U.S. employees and 528 retirees was conducted October 2010.
Stephen Miller is an online editor/manager for SHRM.
Study: Typical 401(k) Participant Can’t Retire Until Age 73, SHRM Online Benefits Discipline, December 2010
SHRM Online Benefits Discipline