Along with the rising average balance, Fidelity also found that employer contributions are rising faster than employee contributions.
According to Fidelity, the firm’s analysis of 12 million 401(k) accounts in more than 20,200 corporate defined contribution plans showed a 19% increase in average annual employer contributions, up to $3,420 at the end of the third quarter from $2,880 at the end of the third quarter in 2007. Meanwhile, average annual employee contributions rose only 7.3%, from $5,500 to $5,900, over the same five-year period.
James M. MacDonald, president of workplace investing at Fidelity, said the numbers are encouraging given that a “healthy” employer match not only impacts an employee’s retirement savings balance, but it can positively impact their behavior, too.
“And employers could do even more to help boost savings, such as increasing their default automatic enrollment rate and utilizing automatic annual increase programs that gradually raise an employee’s savings rate,” MacDonald said in a statement.
Additional Fidelity findings showed a positive impact of plan design features meant to increase participant savings, such as auto-enrollment and auto escalation, over the last five years. Fidelity’s research also indicated that more participants are increasing than are decreasing savings, and that within accounts, participants are allocating to more balanced investments than in previous years.