Jill Schlesinger, Fidelity Investments, Amtrak discussed on Here & Now
As companies have struggled to make ends meet one way they've tried to avoid layoffs is by cutting retirement benefits for employees. Amtrak Lazy Boy. Marianne international or just a few of the companies that are freezing or cutting 401k matches in order to weather the current economic crisis for more let's bring in Jill Schlesinger business analysts with CBS News and host of Jill on money. Hi Jill Hello so. The average employee with a 401k saves about ten thousand dollars per year toward retirement with thirty five hundred of that coming from what the employer puts in as a match that is a voluntary benefit some companies offer but how widespread is the removal of that benefit right now so far not widespread According to fidelity investments they are the largest employer based plan manager and they say that two thirds of companies that have plans with them or not planning to do any sort of suspension or cut to their retirement benefits or their 401k. Match of fewer than ten percent are cutting now this of course is reminiscent of where we were in the financial crisis where a lot of companies did actually suspend something in the order of around twenty percent of companies actually reduced their 401k benefits. And My company back then in two thousand and financial crisis did just that. They pulled the match on the 401K. But why is that often the first thing to go well? I think it seems to be an easier thing to say. Hey we're all in this together we're all gonNa pull back on this match because we're gonNA suffer together and if the alternative is you have no job versus losing a benefit like your 401k match. I think most employees would say. Hey we'll do it and this will probably be temporary and I think that companies are quite concerned that making big cuts now are. It's going to be real detrimental to the the wellbeing of their employees. And I think if you that this is short term in nature. Perhaps this will make it easier to navigate. The you know it's bad news but it's not. I lost my job. Were they short term back then. Did they all come back? I wouldn't say every single one but I'd say most did and and you know if you look at the numbers I think took about twelve months where you know sort of like two thousand nine was a bad year but by the end of two thousand ten it was just fewer than one percent had cutback so. I think that if you could say as a company. Hey we did this in the recession or we hope this is short term. It's an easier message to deliver when it is something that people won't feel immediately especially if they're farther away from retirement. What should people do Jill if their employer has stopped contributing during this downturn? It's obviously still important to save for retirement. Well I think that if you hear this from your employer you know you don't then make the knee jerk reaction of. Oh my God. I'm not getting my free money. I'm not going to put money in. And unfortunately back in two thousand and eight two thousand nine about twenty percent of workers that worked for companies that did suspend those 401k matches. Those people just stop saving entirely for the whole year. And that's a shame because we really do need people to do more than their employer. So maybe if you could afford it and I know that everyone can't but let's just presume you're single you're working and you say okay. I'm still working. I have my money I kept my job. How about you knock up your employer your your contribution by maybe two or three percentage points to make up for the fact that your boss isn't doing that and then we'll be really great as if that 401k gets reinstated you keep the same level so much of this as habit. Jeremy and if we can just get people to put a little bit more in automatically it does do amazing things to your retirement planning over the longer term win over the longer term we have seen the 401k kind of replaced the traditional pension that used to exist in a lot of places now if the 401K is being pulled back on a little bit at least by employers where do you see all this going for workers This is not a great trend needs a long term trend as you said you know one eighties is when we start to see the pension plan for many private companies disappear replaced by the 401K. I don't think pensions are necessarily coming back anytime soon. I think that most people really know that. That's a bygone era. I think that in the future. The problem is that you cannot count on this. 401k matches the promised salvo. Now it's great when things are going well but obviously you've gotta make sure it's there for you and you know the onus is on you that's the problem with a 401k. It was sold to assist great benefit. It's great it's great when the market's going up it's great when your company's matching but when things turn it's you and that means that we have to actually bear that burden as individuals and it's a heavy burden it's y retirement saving remo remains a key problem among so many workers. They just don't have enough money and not enough companies. Make it a standard benefit. We've done a good job with health insurance for many companies. Yes we do have health insurance. We need to make the 401K. Sort of the equivalent of Health Insurance.