SURVEY SAYS: Increasing Salary Deferrals

January 14, 2013 – Last week, I was curious to see if those of us in the industry are following the advice we give participants to increase salary deferrals each year.

I asked NewsDash readers, “Do you plan to increase your deferrals to your employer-sponsored defined contribution plan this year?”  

One percent of responding readers indicated their plans increase deferrals for them by utilizing an automatic deferral increase feature. Twenty-eight percent said they plan to increase their salary deferrals on their own.   

Thirty-nine percent of respondents are already contributing the maximum they can to their plans. Nearly one-third (32%) said they will not increase their salary deferrals this year.  

The verbatim comments showed that many of us are feeling participants’ pain when it comes to setting aside money for retirement. Some commenters noted their deferral increases this year will come from being newly eligible for catch-up contributions. Quite a few expressed regret about not saving more earlier in their careers.  

Editor’s Choice goes to the reader who said: “Wish I had had the wherewithal to have done the maximum for the 1st 15 years of my working career, not just the last 20, ’cause I would have been able to retire years ago and wouldn’t be sitting here responding to the survey.”


The max went up $500 to $23,000 in 2013, so I will increase my biweekly payroll deferral to max out my contributions. 


My spouse and I are already contributing the maximum without the catch-up option which we qualify for. Rather than do the catch-up, we plan to start Roth IRAs to diversify our retirement income sources a little bit. 


And that's actually a maybe -- if I get a salary increase, I will also increase my deferrals -- if not, I can't. So I guess it's up to the company! 


I'd love to be able to increase my deferral, but I'm already contributing more than I can afford! 


I'll increase deferrals if/when my merit increase comes through! 


Finally, it's my turn to save for - me! You bet your sweet bippy it's going to the max! 


Sure wish I could defer more as my personal savings account is non-existent! 


I am paying college tuition for two, so I am lucky to be holding steady in my contributions. 


While I am not at the maximum, my 15% contribution is already high. 


I've consistently contributed at the maximum for the past 20+ years, including catch-ups since I was eligible, and can now plan to retire next year once I turn 60. Wish I had had the wherewithal to have done the maximum for the 1st 15 years of my working career, not just the last 20, 'cause I would have been able to retire years ago and wouldn't be sitting here responding to the survey. 


As my firm has stopped giving us pay increases on a consistent basis, I have struggled to continue with yearly deferral increases myself. I contribute much more than the minimum but probably not enough to retire on time. 


We encourage our employees to time their automatic increase around our annual pay increases so that they don't even see the increase in deferrals. 


I raised the percentage of my increase from 11% to 13% in 2012.


I raised it by 2 percent when the social security rate decreased several years ago - I plan to maintain that increase. Perhaps we can increase next year. 


Sadly no. I haven't had a pay increase in the last 5 years with no bonus coming again in 2013. These are my children's college years to boot. Restoration of FICA tax is just pushing me over the edge. 


I'm doing all I can to contribute the 8% to get the employer 4% (not complaining, that match is in addition to the 4% they give everyone). 


I just can't afford it now. 


I contribute the maximum allowed by law. 


I have contributed the maximum for quite a few years so I only increase deferrals to the extent the limit is increased. 


I made it a priority a long time ago to increase my deferrals every year until I maxed out. Once you are not used to having the money you don't miss it so increasing your deferral at the same time you get a raise is the best way to go. It is a small sacrifice that pays off in the end. 


I've done 10% pre-tax since day one of eligibility when I earned in the teens annually. I can see that what I preach is true because my balance is sizable for my age. 


Already receiving maximum employer match...makes more sense to add to ROTH. 


Increased my deferral last year. The expiration of the social security tax cut took away my increase for this year. 


If I could put in more deferrals, I would!!! 


Yes, I will when my daughter finally graduates from graduate school and I am no longer helping support her. 


For small businesses the automatic deferral feature is a cop-out; the adviser should be actively meeting with every participant and getting a deferral election. Auto increase is a good idea, but as currently structured under the law it is cumbersome to administer and employer/sponsors need to be trained to implement it properly.


First I have a car to pay off, however! 


Having just finished reading Nudge (a must-read for anyone managing benefits or retirement plans), we have a meeting scheduled with the recordkeeper to insist that automatic deferral increases be the default at enrollment. 


I would expect your readership to contain a higher than average percentage of maximum contributors. Although I'm contributing the maximum, I am increasing the portion of my deferral that goes to the Roth option. 


I am finally at the maximum deferral levels but wish I had been able to defer more earlier in my career. 


Happy 50 to me! I have signed up for Catch-up contributions. It's official. Old age is just around the corner. 


Increased mine by 2% when the SS tax was lowered to 4.2% and will leave it unchanged this year. 


I'm not increasing my percent based on the advice of my financial planner. In my new hire orientation, I challenge them to increase the contribution 1% in the middle of every February. Our company gives raises at the end of February. 


I increase at least 1% each year. My goal is 20% 


I'd love to increase my contributions. HCEs in our plan are limited to 5% because nHCE rates are so low. It's pretty pathetic given that we are in the retirement business. No pension plan, and virtually no opportunity to save on my own. I could cry each year when I get my W-2. 


I have been maximizing each year, This year I am catch up eligible so I increased my deferral percent to ensure that I have catch up contributions. (The only reason for admission of this age milestone is the benefit of catch up contributions to my 401(k) and Roth IRA). I feel mucvh younger..... 


Typically I do increase my contribution annually. However, with the return of the 2% social security tax, I will not be increasing this year. 


I was going to increase my deferral but with the "fiscal cliff" change to my taxes, I decided this wasn't the time. 


I would if I could! 


I have contributed the max since I started because I get a discretionary match each year, which is what I consider "free money." Certainly more than anything I would make anywhere else. Taken off the top, I never miss it and enjoy the reward of seeing my nest egg grow and grow! 


I usually up mine about every other year, so I'm half practicing. 😉 


I practice what I preach. Our plan allows deferrals as small as 0.001%, so I have quarterly reminders on my calendar to increase 0.125%. Being able to contribute "more" without noticeable difference on my paycheck really makes this easy to do. 


With the 2% payroll tax increase, and no wage increase last year, I won't be increasing my contribution % this year. 


Each year I increase my salary deferrals by 50% of any raise I receive. And I should have started doing that much, much earlier! 


When the max goes up like this year, I do increase my deferral to get back to the new max. 


I am fortunate to be at an age where my child is on his own and the house is paid and I have no other I'm contributing the maximum. Being the HR Director I do encourage all employees to increase every year. I'm also encouraging Senior Managment to implement auto deferral increases. 


The IRS has enough "automatic increases" affecting my pay check as it is. 


Participants should increase deferrals every year. 


No, because I'm all ready contributing the max % reached through the auto increase feature and my retirement savings are on target! (Pays to start early - I'm 55 and started retirement savings at 27.) 


All plans should allow immediate enrollment of new employees and have auto enroll at 3%. Get them used to the deduction immediately so they don't miss it coming out of their paychecks. 


I am increasing deferrals but only to the extent allowed-meaning as the 402(g) limit was increased, I am increasing contributions by $500. Would increase contributions more to better prepare for retirement but through contribution limitations, the IRS is indicating they don't want Americans to be too comfortable in retirement. Many of us are playing catching after the kids leave home but we're limited as to how much we can catch up! 


I must admit that I in the past I did not practice what I preach. However, as I am now getting closer to retirement, I have diligently tried to max out every year for the past few years - including catch up. Wish I'd started earlier! 


automatic deferral increases, especially when part of an automatic enrollment plan, are vital to increase the rate at which a participant contributes. Plans that simply auto enroll participants at a default rate of say 3%, will not experience any change in the contribution rate for those participants (which will most likely result in the participant not maximizing any company match). The same principal that works for auto enrollment (employee inertia), is why employees do not increase their salary deferrals. 


It's not about how much you save, it's about how much you need to save. The fallacy of the focus on increasing rates of deferral is that you can hit the ceiling pretty quickly. So, people who need to save more than the limit(s) imposed by the law will, of necessity, find other ways. Which makes the 401k a mere subset of their savings strategy. Which makes it less important to them, which makes things like employer matches and even the plan's continued existence (and the attendant cost, administration, and fiduciary liability) ever more precarious. Just saying... 



NOTE: Responses reflect the opinions of individual readers and not the stance of Asset International or its affiliates.