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National averages from Bankrate.com

You Don’t Need Another Credit Card, You Need A Better One.
Avg. APR Last Week 6 Months
Low Interest 11.62% 11.62% 11.53%
Business 12.85% 12.85% 12.85%
Student 13.14% 13.14% 13.14%
Balance Transfer 14.12% 14.12% 14.00%
Airline 15.10% 15.10% 15.15%
Reward 15.14% 15.14% 14.99%
Cash Back 15.27% 15.27% 15.26%
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Bad Credit 22.73% 22.73% 22.48%
Source:CreditCards.com

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Encore
A blog about living in and planning for retirement

401(k) Plan Perks Grow, but Savings Still Lag

Workers are getting a little more help from their employers when it comes to retirement saving, but many are still falling short in building their nest eggs.

After suspending or slashing their matches of employees’ 401(k) contributions  during the recession, most companies have restored them. In 2011, the percent of companies making those matches increased to 95.5%, up from 91% in 2010, according to survey results released this month by the Plan Sponsor Council of America, a nonprofit association that services plan sponsors.

But while more companies are contributing to retirement accounts, they aren’t as generous as they were before the financial crisis. The average company contributed 4.1% of pay in 2011, up from 3.7% in 2010, but still below the peak of 4.7% seen in 2006.

Instead, experts say some employers are throwing in another perk that often doesn’t cost them anything: 401(k) advice. Many retirement plans administered by Charles Schwab, for example, let employees chat with Schwab representatives to discuss their needs and get help comparing mutual funds available to them, says Steve Anderson, head of Schwab Retirement Plan Services.  Those workers who take advantage of the advice tend to save more and be more diversified than those who don’t use the service, says Anderson.  (Schwab’s administrative costs for running the 401(k), which are often evenly divided among a plan’s participants, stay the same whether a company decides to offer advice or not, he says.)

Despite the return of matching contributions, financial advisers and other experts say workers still aren’t saving enough.  For instance, about two-thirds of investors surveyed by T. Rowe Price said they contributed 10% or less of their salaries into their 401(k) plans, according to results released this week. And nearly a third said they were not sure how much they were saving. Christine Fahlund, senior financial planner at T.Rowe Price, recommends workers save closer to 15% to 20% of their income—or more if they don’t start saving until their 40s or 50s. (To gauge whether you’re on pace to afford retirement, check our online planner: http://www.smartmoney.com/retirement/planner/).

Those lower savings rates mean many workers will have to delay retirement, take on part-time work, or spend significantly less during retirement, says Fahlund.  Indeed, while the economy has bounced back, workers’ confidence hasn’t: Just 14% of Americans are confident they will have enough money to live comfortably in retirement, only up slightly from the low of 13% reached in 2009, according to a 2012 survey by the Employee Benefit Research Institute.  And 37% of workers expect they will have to work past age 65, compared to 11% in 1991.

Some advisers say the company match may be – at least partly – to blame, pointing out that some workers see little reason to contribute beyond what their employer matches. For instance, many workers will contribute no more 6% of their pay if their employer only matches up to 6% of their salary, says Steve Vernon, a financial adviser and author of “Money for Life:  Turn Your IRA and 401k Into A Lifetime Retirement Paycheck.” “Don’t take the design of the plan as a signal as to how much you should save,” he says.

Some companies are trying to change that by matching up to a higher portion of a worker’s salary, but lowering the amount matched per dollar, he says. For instance, a company could go from matching up to 5% of pay dollar for dollar, to matching up to 10% of pay, but only contributing 50 cents for each dollar the employee puts in. That would increase the total contribution to 15% of pay from 10% for workers who max out their company contribution, says Vernon, but the total amount contributed by the company would stay the same.

Other companies are trying to boost savings by making the process automatic. The percentage of plans with an automatic enrollment feature increased to 45.9% in 2011, up from 23.6% in 2006, according to the Plan Sponsor Council of America. And 55.2% of plans had a component for automatically increasing the amount contributed, up from 31.2% in 2006.Savers can use these step-up programs, which typically increase the percent allocated by one or two percentage points each year, as a way to work up to the target 15% or 20% savings rate, says Fahlund.

 

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    • This article wasn’t about 401K fees, so it had no reason to dig into that area. The consistent advice has been “Put at least enough in your 401K to get the company match”. As always, people are doing the “at least” or bare minimum, yet we seem surprised? Most folks would much rather spend now, and hope for some kind of magic later. They don’t trust investment advisers (Wall Street), so they’re much happier keeping the money for their ongoing wants rather than saving it. Chances are, it won’t turn out great for them in the long run, but that’s their baby to deal with, not mine!

    • thyey never tell you exactly what the fees are .. there are not supposed to be hidden fees.. but this article does a poor job digging into this..

About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.

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/quotes/zigman/16008136/realtime/sampled 1.12 +0.00 0.22%
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/quotes/zigman/16008150/realtime/sampled 121.25 -0.45 0.37%
Pound
/quotes/zigman/16008140/realtime/sampled 1.53 0.00 0.27%
Australia$
/quotes/zigman/16008115/realtime/sampled 0.71 0.00 0.68%
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Quotes

Symbol Price Change % Change
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AAPL /quotes/zigman/68270/composite 114.00 0.71 0.63%
GOOG /quotes/zigman/30194416/composite 630.80 0.42 0.07%
BAC /quotes/zigman/190927/composite 16.32 -0.04 -0.24%
C /quotes/zigman/5065548/composite 53.38 0.10 0.19%
F /quotes/zigman/264304/composite 13.92 0.18 1.31%
T /quotes/zigman/398198/composite 33.28 -0.01 -0.04%
BP /quotes/zigman/247026/composite 33.51 0.25 0.74%
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Rates »

5 yr CD
1.5%
2 yr CD
0.8%
1 yr CD
0.6%
MMA $10K+
0.3%
MMA $50K+
0.4%

National averages from Bankrate.com

You Don’t Need Another Credit Card, You Need A Better One.
Avg. APR Last Week 6 Months
Low Interest 11.62% 11.62% 11.53%
Business 12.85% 12.85% 12.85%
Student 13.14% 13.14% 13.14%
Balance Transfer 14.12% 14.12% 14.00%
Airline 15.10% 15.10% 15.15%
Reward 15.14% 15.14% 14.99%
Cash Back 15.27% 15.27% 15.26%
Instant Approval 18.00% 18.00% 17.93%
Bad Credit 22.73% 22.73% 22.48%
Source:CreditCards.com

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