http://www.spectrem.com/custom.aspx?id=28In 1999, participation in 401(k) plans stood at 80%, but participation has fallen significantly since then, dropping to 72% in 2002 and 70% in 2005. Over the same period, the percentage of salary put into 401(k) plans has declined 20%, as the average deferral rate fell from 8.6% in 1999 to 6.9% in 2005.
EMPLOYEE PARTICIPATION IN 401(K) PLANS CONTINUES TO DECLINE IN 2005
Participation Is Now Down 13% from 1999
Percentage of Salary Contributed to 401(k) Plans Falls 20% in the 6-Year Period
CHICAGO, February 21, 2006 – People aren’t saving for retirement like they used to – at least, not in their 401(k) plans.
In 1999, participation in 401(k) plans stood at 80%, which means 4 out of 5 eligible employees put money into their companies’ plans that year. Participation has fallen significantly since then, dropping to 72% in 2002 and 70% in 2005, according to the Spectrem Group study “2005 Defined Contribution Market Needs,” released todayThis represents a 6-year decline of 13%.
Further, over the same period the percentage of salary put into 401(k) plans, known as the deferral rate, has declined 20%. The average deferral rate fell from 8.6% in 1999 to 6.9% in 2005.
“Workers appear to be losing their taste for 401(k) retirement savings, with participation in these tax-deferred plans declining 13% over the past 6 years and the percentage of salary put into them dropping 20%. Whether due to decreased enthusiasm for market exposure following the burst of the Internet bubble, generally poor market performance since that time, or other factors, declines of this magnitude could mean that many of today’s workers will find themselves ill-prepared for retirement,” said George H. Walper, Jr., President of Spectrem Group. <snip>
The study, “2005 Defined Contribution Market Needs,” was based on telephone interviews with individuals responsible for defined contribution plans at 500 companies of all sizes in the fourth quarter of 2005. The margin of error is plus or minus 4 percentage points.