The 401(k) match is back, and getting bigger

  • One dollar bills have been dropped into a tip jar at a car wash in Brooklyn, N.Y., Oct. 24, 2016. (AP Photo/Mark Lennihan)

Washington Post
Thursday, August 03, 2017

A common axiom among investors is to save early and often. Let time do the rest.

If you save enough, the thinking goes, the stock market’s inexorable path upward will make you rich. And if you save in a tax-sheltered retirement savings account, you may get there faster.

One of the best tools to get there over the past three decades has been the 401(k) – and the corporate match – that came with it. In many places, one of the first casualties of the financial crisis was the company match.

Now it seems, the match is roaring back. Many companies are boosting their matches in employee 401(k) plans, according to a report by Vanguard Group, the investment firm with $4.4 trillion under management.

The study’s results, titled “How America Saves,” were reported in the the Wall Street Journal.

Many firms are using the automatic matches as an inducement for people to save more, creating more peace of mind and loyalty among employees.

Company matches in 401(k)s are on track to hit 4.7 percent of employee salaries this year, up from 3.9 percent in 2015 and way up compared to 3 percent in 2009 in the depths of the financial crisis, according to the 107-page report.

“Increasing contributions into your retirement plan, especially when you are younger, is a no-brainer,” said Christopher Poch, an adviser with Morgan Stanley Private Wealth Management. “The more you can save for retirement, and the earlier you start, the better off you will be.”

Employers use matches as a carrot to woo new employees, especially in the competitive technology sector.

“We are seeing a higher proportion of tech industry firms providing a match than the broader all-industry average, particularly within the mid-to-larger size firms,” said Aimee DeCamillo, head of T. Rowe Price Retirement Plan Services. “In 2016, we saw almost 81 percent of tech firms offering a match, compared to slightly less than 75 percent across all industries.”