October 31, 2013 (PLANSPONSOR.com) – Retirement plan participants need more education about contribution deferral limits, according to a recent survey.
Preliminary results of the 2013 Mercer Workplace Survey show the average
participant believes his tax deferral limit for 2013 is around $8,500 rather
than the actual limit of $17,500. The survey also found for those in the
50-and-older age range and nearing retirement, the gap between supposed and
accurate knowledge about limits is even more substantial.
In terms of what participants perceived as being their limit
and what they annually contributed to their plans because of that perception:
- For ages 18 to 34, the perceived limit was $7,631 and
the average contribution was $7,535;
- For ages 35 to 49, the figures were $9,476 and $7,667,
- For ages 50 to 64, the figures were $8,304 and $6,673,
- For ages 65 and older, the figures were $9,039 and $7,704,
According to Mercer, the data not only points to a troubling
disconnect between perception and reality, but also creates a false sense of
security among participants when it comes to saving for retirement. Although
61% of respondents said they are saving for retirement outside of their 401(k)
plans, 34% said they would increase their employee contributions to the
tax-deferred maximum limit if they could live the past year over again.
For the survey, online interviews were carried
out with 1,506 retirement plan participants between May 28 and June 5. This represented
a cross-section of participants currently contributing to a 401(k) plan
regardless of balance or those having a balance of $1,000 or more with their
current employer, regardless of whether they are currently contributing. A full release of survey findings will be issued in one to two weeks.