Want to improve your retirement savings? Strive to participate in your company retirement plan - and stay in it. A study by the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI) found that workers who were consistent about participating in a single company's 401(k) plan were more successful at accumulating retirement assets than those who were inconsistent.
Key findings from the EBRI study include the following:
The study found that the advantage to consistent participants was consistent for all age groups. Account balances reflect both employee contributions and employer matching contributions.
The research is important because previous surveys did not bifurcate their data between consistent participants and those whose contribution records were irregular, for whatever reason. The same was true for short-lived plans from employers who started plans and then who went out of business, for whatever reason. These groups were distorting previous studies and skewing records of average balances downward.
"Looking at average balances for all 401(k) accounts does not reflect the system's full potential for workers building their retirement resources," said Sarah Holden, ICI's senior director of retirement and investor research. "By studying the experience of workers who participate consistently across several years, this study shows more accurately the extent to which steady, paycheck-by-paycheck saving and compounding investment returns can help workers accumulate a sizable retirement nest egg."