IBM shifts 401(k) policy to once-a-year matches
Take this example of an employee who earns $45,000 a year, and receives a matching contribution capped at 4 percent. That employee would get an $1,800 match from the company. But if the worker leaves at the end of September under a policy like IBM’s new one, he or she would give up an accrued value of about $1,405, compared with what the worker could have received in biweekly matches. That example assumes a monthly average investment return of 0.4 percent.
Whatever a company’s matching policy, employees need to be saving more for their retirements, Borland said.
Aon Hewitt estimates that employees will typically need a retirement fund worth 11 times their annual end-of-career pay, beyond Social Security, to cover their needs when they stop working. Currently though, Americans are on track to accumulate funds worth only 8.8 times their final salaries, according to the consulting firm’s most recent research.