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401(k) More Valuable When Trying To Attract Top Talent

401(k) Plans Financial Planning

Key Takeaways

  • 90% of workers would give up some of their compensation for access to a 401(k).
  • Younger workers expect financial planning resources from their employers.
  • "The results suggest increasing retirement contributions has a much larger (2.5 times) effect on firm recruiting success than increasing wages,” - NBER

People, especially younger yet highly compensated workers, are looking to their workplaces for a gauge on their finances. It seems workers want to know how to best manage their money, from the same place they recieve it.

InvestmentNews recently published their take on the National Bureau of Economic Research's survey from the summer, "employers competing to fill empty positions with the most talented candidates at a time of historically low unemployment are turning to a once overlooked benefit: the 401(k) match. Workers value that perk more than cash, so much so that a dollar in 401(k) contributions is twice as effective at luring talent as a dollar in wages."

This shouldn't be surprising when all of the previous research has stated that after a worker makes $70K a year, money does not play as large of a role in their decision making. Moreover, if a worker makes $70K in salary, over the course of 40 years of saving and investing in their 401(k)- they'll likely have over $1.4M in retirement savings, if they are consistent.

Emile Hallez even went on to point out that, "the survey found that people were willing to forgo 3.4% of wages just to have access to a 401(k), as well as an additional 1.6% in wages for each percentage point of an employer match. The job-search model also supported that, finding that 90% of workers appear willing to give up some level of compensation to get a 401(k), and 75% would do so for higher employer contributions to their retirement accounts."

It is safe to assume that workers are looking to their places of employment for the benefits they offer. In order to stay competitive, employers should be offering both healthcare coverage and qualified retirement plans that deduct contributions directly from payroll.

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