The number of Americans who no longer have a 401(k) match is growing exponentially. Some 22 percent of companies report they have recently reduced their contributions to employee 401(k) or 403(b) accounts, up from 12 percent in February and just 2 percent in October 2008, according to a Watson Wyatt survey of 141 employers conducted this month. Another 8 percent of employers expect to slim their match in the next 12 months. And 4 percent of the companies surveyed that already trimmed their match plan to further cut employer contributions this year.
If workers don’t make up for losing the match with their own savings, their nest egg will be thousands of dollars smaller in retirement. When a 50 percent 401(k) match is suspended for just one year, a 30-year-old worker earning $50,000 annually who saves 6 percent of his salary will have $16,000 less in retirement, according to a Hewitt Associates analysis.
And if 401(k) match cuts weren’t hurting your retirement prospects enough, an increasing number of workers are also robbing their own retirement stash by taking hardship withdrawals or borrowing cash from their 401(k)s. The number of companies that noted an increase in employee early withdrawals and loans from retirement accounts has more than doubled since October 2008, Watson Wyatt found.