Eighty-one percent of employees in 401(k) plans won’t be able to retire at 65, according to a study by Nyhart, an employee benefit consulting, actuarial and administration firm.
The study’s analysis of 401(k) plans at 110 public and private companies also found that the average participant relying on a 401(k) as the primary savings source will have to keep working until 73 to achieve an adequate retirement income, confirmed James Burnes, a Nyhart spokesman. He said the study of Nyhart’s 401(k) clients examined records of more than 10,000 participants.
“Across all age groups and income levels, the employees who contribute the greatest percentage of income have the best opportunity for retirement,” Thomas Totten, CEO, senior actuary and lead researcher for the study, said in a news release.
“The decision of how much an employee contributes to their 401(k) far exceeds the importance of which investment funds they choose,” Mr. Totten said in the release. “By increasing your contribution by just 2% to 4% of total income, you can shave years off the age you retire.”
According to the Nyhart study, employees “have not been given the appropriate tools to appreciate the importance” of contributing significantly to retirement savings plans.
“Little or no time, especially early on is spent educating employees on how contributions today impact the age at which they will retire,” the study says. “As such, they spend more time thinking about which funds to invest in — not how much to contribute.”