Personal Finance

Here's why people aren't saving more in their 401(k) plans

Key Points
  • Three out of 10 workers polled by personal finance site said they raised their retirement plan contributions in the last year.
  • Another 16% of employees curtailed their savings in their 401(k).
  • Primary reasons for opting not to increase retirement savings include being comfortable with their current savings rate and stagnant or decreasing wages.
A young couple going through financial problems
Geber86 | E+ | Getty Images

American workers are facing a retirement crisis — and few are doing anything about it.

Just three out of 10 workers polled by said they increased contributions to their retirement plans from where they were last year.

The personal finance site surveyed 2,016 adults in July and August.

Another 16% of participants said they dialed back their retirement savings from last year, while close to half said they kept their contributions level.

Here's how to handle market anxiety

Although a handful of 401(k) plan participants have hit seven-figure account balances, other workers might be more hesitant about socking away money amid fears of a recession and recent market volatility.

If you hesitate to invest now, you'll be paying for it later.

"My concern is that people see this short-term volatility and make decisions that are detrimental to their long-term financial security," said Greg McBride, chief financial analyst at

"If you feel the need to do something, boost your emergency savings, pay down debt and identify which expenses you can cut if you need it," he said. "But do not mess with your retirement account."

Saving just enough

Magic number for retirement

Americans believe that they need $1.7 million to retire, according to data from Charles Schwab.

Workers in their 20s could get their retirement savings on firmer footing by socking away 10% to 15% of their salary each year, Schwab found.

Those employees also benefit from compounding market returns over several decades.

If you hold off until your 40s to start saving, you'll need to stash more than 35% of every dollar you earn to bulk up your retirement savings balance, according to Schwab.

This year, you can defer up to $19,000 of your pretax salary into your company's 401(k) plan, plus an additional $6,000 if you're 50 and up.

Hitting the maximum contribution is a challenge, but a handful of workers have done it. Consider that 4.6 million taxpayers maxed out their 401(k) plans back in 2016, according to data from the IRS.

Falling short on your 401(k)

Jamie Grill | Blend Images | Getty Images

Nevertheless, not all workers are tossing every spare cent into their retirement plan.

Of the participants who said they weren't raising their retirement contribution in 2019, about a quarter said they weren't doing so because they were "comfortable" with their current savings level.

"People in their 50s and 60s are more likely to give that answer because they realize they might be on track after all, and that's encouraging," said McBride.

More from Personal Finance:
How much you'll need to invest to retire with $1 million
This state is home to the best cities for renters
Parents exploit this loophole to secure more college financial aid

Stagnant or shrinking incomes were another major driver behind workers' reluctance to save, garnering close to a quarter of the vote.

"Focusing on another financial priority" rounded out the three major reasons why people aren't saving more money, chosen by 16% of participants.

"The urgency to pay down debt at the expense of saving for retirement can prove to be a grave error," McBride said.

Save what you can

c-George | Getty Images

Workers face competing priorities: Hefty retirement contributions help prepare you for the future, but you'll have less take-home pay to cover your current living expenses.

While retirement plan service providers recommend that workers save at least 15% of their pretax income each year, employer matches and profit sharing can help you reach that number.

Employees saved a median 6% of their salary in their 401(k) plans in 2018, and the median contribution rate jumped to 9.8% when including employer matches, according to data from Vanguard.

"This 15% threshold is what we should all be aiming for in terms of retirement savings," McBride said. "Our burden of providing for ourselves in retirement has gotten bigger as pensions become less common and expenses rise."