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Without 401k's, many wouldn't save

A new survey also finds that the majority don't contribute as much as they think they should to their workplace retirement plans.

By MSN Money Partner Jul 19, 2011 3:50PM

This post comes from Joe Mont at partner site The Street.


The majority of working Americans would not be saving at all for retirement were it not for workplace 401k plans, a survey by Fidelity Investments claims.


The survey, released July 14, found that 55% of participants in workplace savings plans say they would not be saving for retirement otherwise. Nearly one in five said they have no retirement savings outside these plans.


When asked about top reasons that encouraged them to use 401k's, 92% said it was important or very important not to lose out on company match dollars, and 90% felt the plans were a good tax-deferred way to save.


Blaming economic conditions, 54% of those who participated in the survey admitted they are not contributing to their 401k plans as much as they should. Nevertheless, in May, Fidelity reported that nearly one in 10 corporate defined-contribution participants increased their contribution rate during the first quarter of this year, the largest percentage to do so since the firm started tracking the figure in 2006.


The survey also found that more than half of respondents had increased their contribution rate in the past five years, despite market volatility and economic uncertainty. (How much money will my 401k provide?)


Only 23% of working respondents reported ever decreasing their workplace plan contribution percentage. Of them, 46% reported needing extra money, and 9% said it was due to the elimination of a company match. Forty percent of these respondents said "they already do -- or possibly will -- regret the decision."


Similarly, nearly one-quarter of respondents have taken a loan from their retirement plan, with 29% saying they regret the decision and would not do it again.


More on The Street and MSN Money:

Jul 20, 2011 11:15AM
Someone (yes man 259), I don't LIKE what you said but it is true. This government has long punished responsible behavior. Fill out the FASFA for student aid and it wants to know your savings, stocks, and other net worth items. The more you have saved, the more they expect you to pay. I know the point is to help those that "need" it but the problem is this. You have someone making $200,000 and they don't save a penny. Then you have a couple making $100,000 that saves every penny possible. A big part of the formula is income but the other part is net worth/savings (excluding retirement accounts). In fact, my parents and I were encouraged to minimize our savings prior to filling out the FAFSA. We were told, "Don't hide anything, that is illegal but spend it if you can. Pay any bills you have early. If you are thinking about a large purchase, make it now. Get your savings as low as possible without hiding money." Why are we punishing savings? Why do we punish good behavior? Putting money in a 529, it will eventually hurt your FAFSA score as you start to make withdraws.

Social Security is the same thing. Punish those that saved. How much I saved has 0 to do with how much I paid into SS and thus should not impact how much I collect.

My responsible savings shouldn't hurt me but it does. It will hurt me when my kids go to college and it will hurt me when I retire. That is horribly, horribly sad but true. You are rewarded for being irresponsible and depending on the government.
Jul 20, 2011 10:48AM
Only 23% of working respondents reported ever decreasing their workplace plan contribution percentage. Of them, 46% reported needing extra money, and 9% said it was due to the elimination of a company match. Forty percent of these respondents said "they already do -- or possibly will -- regret the decision."


They shouldn't look at percentage. I lowered my percentage the last couple years because I am at the limit for pre-tax which hasn't been raised. If/when they ever raise the legal limit more than I get in a raise, I won't have to lower my percentage.
Jul 20, 2011 3:51PM
If you make too much, you will get to pay taxes on your SS once again. The tax man always punishes the ones that do right. Another post said the same thing but a different way.

Another negative point about saving for retirement. In this investment climate we have today, there is not any place, to put your savings, where the savings will grow faster than the rate of inflation. Forget about safe investments, like savings accts. at banks, where your principle is guaranteed. In reality, you are guaranteed, that your return, will not keep up with the rate of inflation, so you will be losing, purchasing power. Then there is the stock market, where you could have more or less, when you make the withdrawals after you retire. These investment advisors, like to bring out historical charts, and show you, how much your savings would grow, if you would have put money in the stock market years ago. But read the fine print, on the bottom of the page on those charts, the past is no guarantee of future returns.

You will not see any news articles, point out the facts, that I laid out in this and my previous message. Without investments, there is no commission to be made on your investments, and the fat cats, on Wall Street, need your investments and there subsequent commission, on your investments.


Many will not agree with the following, but a  negative point about saving for retirement.

1. If you have enough money when you retire, Uncle Sam has a negative gift for you. You get to pay taxes on your social security.


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