Automatic 401K registration with new hires?

[bigdaddybus]

Does your employer offer automatic 401K sign up when new employees start? My employer just started this year with an automatic signup set to a 3% contribution from the employee and automatic increase of 1% on the employees anniversary up to a total of 10%.

I thought this was a pretty good change for 2017. What does your employer do?

[disneysteve]

We have a 401k but no automatic sign up.

The problem with automatic sign up is that it doesn't ramp up the contributions enough. In your case, it would take 7 years to get up to 10%, still well below the recommended 15%. And many places do the automatic sign up but no increases which is even worse as most employees tend to just do whatever the company set up, so they stay at 2 or 3% indefinitely. It's certainly better than nothing but not nearly enough.

[StormRichards]

And many places do the automatic sign up but no increases which is even worse as most employees tend to just do whatever the company set up, so they stay at 2 or 3% indefinitely. It's certainly better than nothing but not nearly enough.

That is the scenario at my company. Auto enroll at 2% and no automatic increases.

[disneysteve]

That is the scenario at my company. Auto enroll at 2% and no automatic increases.

I've seen studies that showed that folks with that arrangement actually save less than people who have to sign up themselves. It makes sense because having to actively do something makes the patients actually think about the process.

[Captain Save]

That's a little much .. isn't it? The employee has no idea what they're getting into ..cause an HR person is basically their financial advisor at that point. Now it's most likely a good idea for the vast majority of people (as long as there is a good match) , however these forced 401k enrollment is a push by the financial industry to make make more money on things that they don't understand.

[disneysteve]

Another problem is the investment choice for the automatic sign up. Sometimes it is something very conservative, not appropriate for a young person.

[phantom]

My employer auto-enrolls people in the 401k at 3% and invests the money in an appropriate target date fund based on age. I don't remember if there's any auto incrementing. I remember thinking they should have made it 6% since the match is 50% on up to 6%. But, it was easy enough to change my contribution so I'd get the full match, so I can't complain.

[greenskeeper]

No auto enroll here. Of course you'd have to be a dope not to at least take the 100% matching on the first 6%.....free money!

[Captain Save]

Another problem is the investment choice for the automatic sign up. Sometimes it is something very conservative, not appropriate for a young person.

Well they rather err on the side of caution .. which I don't have a problem with. not every new hire is a young person .. but the real problem with that is that the reason they have to do that is that there is no real conversation taking place..the 401k administrators get their cut but barely have to do any work in terms of advising ..

[scfr]

I have 2 jobs. At the more corporate job they recently added auto enroll for new hires at 3%, increased by 1% each year until it hits 6%. Employees can choose to opt out or change their contribution at any time.

By the time someone hits 6% contribution they are also getting 4-1/2% employer match.
On top of that, annual bonuses automatically go in to the 401k, so someone who doesn't make any active decisions and just passively accepts what happens automatically is going to wind up tucking away a respectable amount for retirement. Not great, but a heck of a lot better than nothing.

[~bs]

We have a 401k but no automatic sign up.

The problem with automatic sign up is that it doesn't ramp up the contributions enough. In your case, it would take 7 years to get up to 10%, still well below the recommended 15%. And many places do the automatic sign up but no increases which is even worse as most employees tend to just do whatever the company set up, so they stay at 2 or 3% indefinitely. It's certainly better than nothing but not nearly enough.

I believe I read an article that the government is pushing for this automatic signup thing, and many larger companies are playing along.

The percentage is extremely low, but at least it's a start, and it's less likely that the employee will cancel the plan because it's taking out "too much"

[Thrif-t]

Does your employer offer automatic 401K sign up when new employees start? My employer just started this year with an automatic signup set to a 3% contribution from the employee and automatic increase of 1% on the employees anniversary up to a total of 10%.

I thought this was a pretty good change for 2017. What does your employer do?

Yep my company started the auto increase up to 10% a couple of years ago. Caused a big hoopla with a lot of the hourly folks, but I feel its for their own good. They should've started this a long time ago! So many people don't save because they say they can't afford to. Once it's done for them they get used to it or cut back in other non essential places. I feel it's a win win for society