FILE - In this file photo taken Jan. 13, 2011, the IBM logo is displayed on hardware for an IBM computer known as "Watson" in Yorktown Heights, N.Y., after a practice round of the "Jeopardy!" quiz show. IBM will begin making lump-sum matching contributions to employees' 401(k) accounts on an annual basis, rather than contributing each time a worker gets a paycheck, the company announced Friday, Dec. 7, 2012. It's a move that will help the technology company cut retirement benefits costs. (AP Photo/Seth Wenig, File)
IBM shifts 401(k) policy to once-a-year matches
FILE - In this file photo taken Jan. 13, 2011, the IBM logo is displayed on hardware for an IBM computer known as "Watson" in Yorktown Heights, N.Y., after a practice round of the "Jeopardy!" quiz show. IBM will begin making lump-sum matching contributions to employees' 401(k) accounts on an annual basis, rather than contributing each time a worker gets a paycheck, the company announced Friday, Dec. 7, 2012. It's a move that will help the technology company cut retirement benefits costs. (AP Photo/Seth Wenig, File)
By MARK JEWELL and STEVE ROTHWELL
AP Business Writers /
December 8, 2012
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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.
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