Quirky workplace perks, like indoor putting greens and free popcorn in the break room, might drive some millennials to jump at taking a job.
But the basics, like what’s the match on the 401(k), will have a more meaningful impact on how much money you’ll be able to sock away.
When it comes to 401(k) programs, the specifics at individual companies can be all across the map. Some companies, like General Motors, Fiat Chrysler and Quicken Loans,declined to share information with us when we asked for some specifics.
Yet if you’re looking for a job, it’s as importantto compare401(k) plan benefitsas it is to seek a competitive salary. Here are some questions to ask potential employers toget you started:
How much money will you add tomy 401(k)?
One beauty of a 401(k) is that many companies offer money to match what you save.
Some companies will contribute 50 cents on every dollar you contribute, up to 6% of your contributions. Essentially, that can translate to basically the same thing as adollar-for-dollar match up to 3% of your pay before taxes.
You’re walking away from that extra money, though, if you don’t save in the 401(k).
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Will you helpsign me up automatically?
Plenty of parents and grandparents will tell a 20-something that they must rush to sign up for the 401(k). And employers are making it easier to enroll.
But what if you drag your feet?
Don’t worry. Many companies, including Quicken Loans and Ford Motor,now will sign up new hires automatically and make you save, if you don’t enroll on your own.
“We do automatically enroll in the 401(k). They do have the ability to change that at any time,” said Mike Malloy, chief people officer for Quicken Loans. “We believe we’re doing the right thing with our team members.”
Malloy said saving for retirement is part of a team member’s overall financial wellness. New hires who are juggling student loans tend to want to learn how to balance their financial obligations and don’t typically skip saving in the 401(k) once they are signed up.
“We don’t see a lot of people opting out, once opted in,” said Malloy, who declined to give specifics on Quicken’s 401(k) plan.
Katie Taylor, vice president of thought leadership at Fidelity Investment, said more employers have been adding automatic enrollment in recent years for new hires.
About one-third of employers with 401(k) plans run by Fidelity will automatically enroll their employees in retirement savings plans, she said. Among larger employers with 1,000 or more workers, about 60% offer auto-enrollment, Taylor said.Of the plans that offer auto-enrollment, about 49% focus on new hires, while 51% will auto-enroll any eligible employee, she said.
The Pension Protection Act of 2006 addressed some employer concerns about adopting the automatic feature.Depending on the plan, employees may have a 90-day window after auto-enrollment to opt out by withdrawing contributions and earnings. They would owe income tax on those contributions and earnings, but would not be subject to a premature distribution penalty of 10%.
Of course, more people end up saving in 401(k) plans when their employer automatically enrolls them.
Automatic enrollment nearly doubles participation rates among new hires, according to a report issued by Vanguard in March. Employees can stop making contributions at any time, but many times they don’t make changes because of inertia.
Will you ever help me increase what I contributetoward retirement?
About 42% of employers with automatic enrollment set that contribution rate at 3%. But others might set the rate at 5% or 6%, according to the Vanguard report.
And some employers gradually increase the automatic savings by a few percentage points a year. Take time to understand an employer’s plan.
If you start out saving 3% of pay, it’s wise to make sure that you’re aiming to boost your savings rate over time to get closer to 10% or more to save a reasonable amount of money toward retirement.
“3% is great. It’s a great starting point but 3% isn’t enough,” said Fidelity’s Taylor.
If an employee getsa pay increase, she said, it’s a good time to increase one’s contribution to a 401(k) plan.
Some goals to consider: Aim to have one year’s salary saved up in a 401(k) plan by age 30 and havetwo times your salarysaved by age 35, according to Fidelity. By age 60, you’d want to have eight times your annual income already set aside in retirement savings.
To get there, try for saving something closer to 15% or more as early as age 25 including any company match.
For 2018, the basic limit on employee contributions for 401(k) plans is $18,500. The catch-up contribution for those 50 and older is another $6,000. Other limits can apply based on the plan.
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Do I have any choice about how my retirement money is invested?
Many times, you’ll have a dozen or more options to consider when it comes to investing in stock funds and bond funds.
But if the employee is automatically enrolled and doesn’t choose how to invest the money, most of the time nearly 64% of plans initially will end up investing the money in target retirement date funds, according toPlan Sponsor Council of America.
A target date fund offers a mix of stocks, bonds and cash that takes on more risk when you are younger. The target date is geared to the year you’d likely retire. Review the risks you’re taking with those funds.
Employees can always move that money into other mutual funds and other investments.
The younger you are, the more likely the target date fund will be aggressively tilted toward stocks.
But many retirement savings plans offer different default options including balanced funds (a set mix of stocks and bonds), as well as very conservative options, such as a money market fund and stable value funds. Check with your plan.
Many times people don’t make a move to select their own investment options. About three-quarters of participants remain exclusively invested in the default investment fund after three years, according to Vanguard’s research.
If you need examples of what to review,here’s a look at some 401(k) details of fiveMichigan employers:
BorgWarner: 100% match on the first 3% contributed
If new hires havenot enrolled in the plan bythe end of the first 60 days on the job, they will automatically be enrolled in the 401(k) at 3% of pay before taxes, according to Tonit Calaway, vice president and chief human resources officer for BorgWarner, which has its headquarters in Auburn Hills.
The default investment is a retirement date fund that is closest to the year in which the employee would turn 65.
The auto supplier has five facilities in Michigan (two in Auburn Hills, and one eachin Cadillac, Marshall and Livonia) with about 1,000 employees in the state.
BorgWarner has approximately 6,100 employees in the U.S.
The employee starts contributing at 3% but contributions increase automatically by 1% each April 1, unless that employee elects to opt out of the automatic increase. The auto increases stop once an employee reaches a 10% before-tax contribution rate.
The match is $1 for $1 on the first 3% contributed. Matching contributions begin as soon as the employee begins to contribute.
But if U.S. employees quitbefore their three years of service, they would lose the matching contributions.
The BorgWarner plan also added a Roth 401(k) option in early 2017.
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Ford Motor Co.: Auto-enrollment starts at 5% for salaried employees
All new salaried employees are automatically enrolled to contribute 5% of their pay which allows the full company match of 4.5%. Example: If you make $50,000 a year, you’re setting aside $2,500 and getting a match of $2,250. In addition, salaried employees geta company retirement contribution ranging from $1,750 to $2,750.
For salaried employees, automatic contributions increase 1% a year to a maximum of 10%. (Employees can choose to contribute more or less.)
For hourly workers, the automatic enrollment is 3% of pay going up by 1% a year to a maximum of 6%. (Employees can contribute more or less,if they’d like.) There are not typical matching contributions for hourly employees. Instead, there are two automatic company contributions one is based on 6.4% of base pay and another $1 per base hour worked per pay period.
Henry Ford Hospital System: Maximum match of 3.5%
New employees are auto enrolled in the 403(b) at 3% of earnings after about 60 days of service. Then, employee contributions of up to 6% are matched at a maximum of 3.5%. The formula is a dollar-for-dollar match on the first 1% of contributions and 50 cents on the dollar on the next 5%.
Each year, employees who are auto-enrolled would see an automatic increase for their contributions. It goes up to 4% of before tax pay the second year, 5% the third year and 6% the fourth year.
In addition to the matching contribution, Henry Ford enhances the 403(b) plan benefit by also offering an annual “employer-paid only” contribution to the plan on behalf of employees based on their age and years of service.
Stryker: Auto-enrollment for new hires
New hires at the global medical technology company will see 3% of before-tax pay automatically deducted from paychecks and then deductions increase by 1% each year until the 15% mark is reached.
The default investment is a “low-cost, age-appropriate target date fund,” according to the Kalamazoo-based company.
Its primary 401(k) plan which covers about 80% of eligible employees matches 50 cents for every dollar contributed by an employee up to 8% of eligible wages. Sales reps receive 50 cents on the dollar for up to 6% of eligible wages.
Stryker also has made a discretionary contribution for non-sales rep employees to the plan for the past 28 years for employees who work a minimum of 1,000 hours and are employed on the last day of the previous year. Those employees receive 7% of their salary and bonus into their 401(k) plan regardless of whether they participate in the plan.
Cornerstone Community Financial Credit Union: An extra 4% contribution
The Auburn Hills-based credit union, which has about 70 part-time and full-time employees, has a dollar-for-dollar match on up to the first 4% of an employee’s contributions into the 401(k). But the credit unionadds another 4% of pay on top of that match in lieu of a pension.
Andrea Cornell, human resources manager, said new hires can start contributing to the plan after one year on the job. New participants can join the plan in the first quarter after reaching the one-year mark Jan. 1, April 1, July 1 and Oct. 1.
If employees don’t sign up, they’re automatically enrolled at a 3% contribution rate. Contributions would stay at that rate unless the employee decides to increase their contributions.
If the employee quits before five years, the employee would lose some or all of the matching contributions, depending on how long the employee stayed on the job.
Contact Susan Tompor: firstname.lastname@example.org or 313-222-8876. Follow Susan on Twitter @tompor.