401(k) savings: Employer knows best?
We're going to get people to save more money whether they like it or not.
Financial literacy took another step forward recently with the release of a report by the Employee Benefit Research Institute. The report claims that contributions to 401(k) plans will increase significantly thanks to the Pension Protection Act of 2006, which allows employers to automatically enroll workers in 401(k) plans and to automatically increase workers' 401(k) contributions on employment anniversaries. (Workers, by the way, can opt out of the arrangment if they choose.)
According to this Investment News article, the report "predicts that the automatic escalation will increase 401(k) accumulations by 11 to 28 percent for participants in the lowest income group and 5 to 12 percent for participants in the highest income group."