Employees socked away more money in their workplace retirement plans last year than in any other year in the past decade, according to T. Rowe Price.
The investment management company recently released its 10th annual benchmarking report on employer-sponsored retirement plans. The report shows that the average worker’s pretax contribution rate was 8.3 percent in 2017 — the highest in the 10 years since T. Rowe Price started reporting plan participant data.
The average employee’s workplace retirement account balance increased by $9,583 last year, according to the report. That is a marked improvement compared with the $2,502 by which the average worker’s account balance increased in 2016.
The report attributes the average 2017 balance increase to both market performance and a higher default contribution rate. Last year was the first in which the number of retirement plans with a 6 percent default contribution rate exceeded the number of plans with a 3 percent default contribution rate, according to T. Rowe Price.
Another record: The report shows that among workers who were eligible to make so-called “catch-up contributions” to their retirement plans, 12.2 percent made them last year. That is the highest catch-up contribution rate in 10 years.
If your own retirement contribution rate lagged last year or you simply want to push it higher going forward, consider taking any of the following steps:
Increase your contribution rate
Find out what percentage of your income is being diverted from your paycheck to your workplace retirement account. Then, make a plan to increase the percentage gradually so you barely notice the effect on your paycheck.
In other words, bump up the percentage by a set amount at a set interval. Even an increase of 1 percentage point once a year can add up over time.
Max out your employer match
If your employer matches your contributions to your workplace retirement account, be sure to contribute at least enough money to get the full value of that match. As Money Talks News founder Stacy Johnson says in “Ask Stacy: How Much Should I Contribute to My 401(k)?“:
Employer contributions are free money — the greatest source of no-strings-attached dough most of us will ever see. You don’t have to be an expert in personal finance to realize when you’re offered free money, you should always take it.
Make catch-up contributions
Currently, folks ages 50 and older who have specific types of tax-advantaged retirement accounts — including 401(k)s — can make bigger contributions than younger folks. This is dubbed the “catch-up contribution.” The catch-up contribution limit varies depending on the nature of the account.
How much do you sock away in your retirement account? Sound off below or over on our Facebook page.