How Important is a High 401(k) Match?

Americans have an eye on the future and retirement. Many workers view employer contributions as one of the most important components of their benefits offering, according to a new study from Fidelity.

Approximately 80% of workplace savings plans offer some type of employer contribution, which is, on average, 4.3%. According to Fidelity’s data, employers contribute an average of $3,450 per employee annually, which is more than $1,000 higher than 10 years ago.

The survey found 43% of workers would prefer to have a lower compensation in return for a higher employer contribution to their 401(k). The results showed workers were more likely to accept a position with a company match. Only 13% would take a job with no match, even if it came with a higher pay level.

“Employer contributions play a vital role in helping Americans reach their retirement savings goals — these contributions represent more than 35% of the total contributions on average to an employee’s workplace savings account,” Doug Fisher, senior vice president of Workplace Investing at Fidelity, said in a statement.

He added that Fidelity recommends a total retirement saving rate between 10% and 15% of salary to ensure employees have enough for retirement. However, many Americans will only reach that savings level if the company matches employee 401(k) contributions, Fisher said.

Roughly one in 4 (42%) of respondents indicated the 401(k) plan is their sole source of retirement savings. With personal and retirement savings expected to fund a large part of retirement income, Fidelity recommends saving enough to replace 85% of net final pay.

A separate survey from LIMRA found 78% of workers recognize their personal responsibility to save for retirement. More than three-quarters of respondents believe that all workers should have access to a retirement savings plan at work because it is an effective way to save for retirement.

The LIMRA survey found 3 in 10 workers expect their defined contribution plan would represent their primary source of retirement income.

"It is encouraging to see that so many Americans understand that their action - or inaction - during their working years can determine their financial security in retirement," Alison Salka, senior vice president, director LIMRA Research, said in a statement. "Systematically saving throughout one's career is essential for the majority of Americans to attain their preferred retirement lifestyle once their working years come to an end."