Participation in 401k Plans Declines in 2005 According to Spectrem Group
CHICAGO, IL, February 21, 2006 -- People aren't saving for retirement like they used to – at least, not in their 401k plans.
In 1999, participation in 401k 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 today. This represents a 6-year decline of 13%.
Further, over the same period the percentage of salary put into 401k 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 401k 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.
401k Plan Participation and Deferral Rates
|
Year
|
Participation Rate
(% of Eligible Employees)
|
Deferral Rate
(% of Salary)
|
|
1995
|
76%
|
n/a
|
|
1997
|
79%
|
n/a
|
|
1999
|
80%
|
8.6%
|
|
2002
|
72%
|
7.0%
|
|
2005
|
70%
|
6.9%
|
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. Those interested in purchasing Spectrem Group studies should contact Spectrem Group at 641 W. Lake Street, Suite 402, Chicago, IL 60661, (312) 382-8284 (www.spectrem.com).
About Spectrem Group
Spectrem Group is a strategic consulting firm specializing in the affluent and retirement markets. It integrates proprietary research with expertise in building business, marketing and M&A strategies. Spectrem professionals have held senior management positions at leading global companies. Through a collaborative process, they create and implement practical and profitable strategies that fit the cultures of client firms.
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