Forecast: Modest raises ahead
But employer contributions to 401(k) plans on the rise
If the low unemployment numbers have you thinking you’ll finally get a bigger raise in January, think again.
Most large employers plan to boost salaries for 2018, but the average increase will be about 3 percent — roughly the same as it has been for the past three years, according to consulting firm Willis Towers Watson.
With many companies having a hard time filling positions, the modest increase would seem to defy Economics 101. One explanation: Many employers are no longer offering equal raises. Willis Towers Watson found that employees who had earned the highest performance rating received an average salary increase of 4.5 percent, and those with an average rating received 2.6 percent.
With open-enrollment season approaching, this is a good time to take stock of your total compensation, including health insurance, retirement benefits, paid leave and other benefits. You may discover that your employer has improved some of those perks, but they’re not always automatic.
For example, if you fail to contribute to your employer’s 401(k) plan, you could be leaving more money on the table than ever. The average employer contribution to 401(k) plans managed by the Vanguard Group rose to an estimated 4.7 percent of employees’ salaries in 2016, up from 3.9 percent in 2015.
In addition, you may have more options for the type of plan you invest in.
Nearly 60 percent of large companies offered a Roth 401(k) plan at the end of 2016, according to the Transamerica Center for Retirement Studies. Contributions to a Roth 401(k) won’t reduce your taxable income, but as with Roth IRAs, withdrawals are tax- and penalty-free as long as you’ve owned the account for five years and are at least 59
To help workers cope with rising health care expenses, including higher co-payments and other out-of-pocket costs, more employers are offering tax-advantaged health savings accounts. These plans are even more valuable if your employer kicks in some seed money.
For 2018, employers are offering a median contribution of $650 per employee, up from $600 in 2017.
As Americans’ personal finances have grown increasingly complex, employers are rolling out programs designed to help workers manage their money.
A survey of employees by Mercer Consulting found that the average worker spends about 150 hours a year worrying about money, resulting in more than $250 billion in lost productivity.
About 84 percent of large and midsize companies are offering debt management tools, student loan counseling and other financial well-being programs this year, according to a survey by Fidelity Investments and the National Business Group on Health.
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