Microsoft raises 401k contribution matching to help retain employees
Advisors say that to retire, employees should save up to 15% of their salaries each year. With a program like the 401k setup, workers are encouraged to put pre-tax money into the savings with an optional contribution from their employers for a long term solution. However, some have been unhappy with the results.
The 401k plan that many employers offer to its workers has been undergoing a shift in the last year. During 2016, many companies have been adjusting how much they contribute to the employee retirement savings as an effort to retain high-quality workers. Microsoft is among the list of companies increasing the money they give to their employee’s 401k.
As Wall Street Journal notes, Microsoft tried to get employees to change their own contribution first. Three years ago, it increased the base options for employee contribution to 8%, 10%, or 12 % compared to those as low as 6% before. But seeing as that didn’t have the outcome they preferred, the tech giant decided to go a different route.
Last year, Microsoft started contributing more money into the 401k program, adding in half of employee savings up to the federal limits. In total, Microsoft ended up adding another $150 million more to their retirement savings plans, which was already above $17 billion for its 60,000 employees.
The incentive adopted by Microsoft and other companies have had a positive impact on retirement savings. The outcome was that more people under Microsoft saved more money into their 401k plans, with 52% of employees maximizing contributions. That number is up from 36% from the year before. With more contributions from employers in early stages of 401k plans,
With more contributions from employers in early stages of 401k plans, high-quality workers will remain at their jobs until retirement, avoiding more healthcare costs down the line and promoting new younger workers into their place. Thus, creating a revolving door of inspired individuals to work hard, save more, and be happier at their jobs.Further reading: 401k, Microsoft