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10 things

Feb. 23, 2013, 7:01 a.m. EST

10 things 401(k) plans won’t tell you

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By Elizabeth O'Brien

Continued from page 9

10. Autoenrollment alone won’t save you.

Automatic enrollment has risen in recent years, placing employees in 401(k) plans even if they don’t opt in. Nearly a quarter of large firms offered auto-enrollment to all employees in 2012, up from just 10% in 2009, according to Towers Watson. While it’s good that employees are forced to save(few who are auto-enrolled bother to opt out), employee advocates say, they’re not saving as much as they should. That’s because companies often deliberately set the default contribution rate low — generally around 3% of pay — so they don’t have to match as much, Credico says. Of course, employees can always change their default rate, but few bother.

Indeed, many workers don’t even know their contribution rate. Vernon conducts regular workshops with plan participants. Recently, he’s been askingroomfuls of them how many read the fee disclosures they gotover the summer, and invariably only one or two hands go up, he says. This isn’t necessarily bad news if those few are vocal staffers who can educate and motivate their fellow employees. But really, no one can afford to be complacent when it comes to planning for retirement, Vernon says: “People vastly underestimate how much money it takes to have a lifetime income.”

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