Dive Brief:
- Employees will be allowed to contribute a maximum of $19,500 to their 401(k)s in 2020, the IRS announced Wednesday. The move represents a $500 increase over 2019's limit.
- The agency also will increase the catch-up contribution limit for employees age 50 and older from $6,000 to $6,500.
- Other changes are outlined in notice 2019-59, which the IRS said provides cost‑of‑living adjustments affecting limits for pension plans and other retirement-related items for 2020.
Dive Insight:
Employee retirement readiness remains a top concern for employers. According to a 2018 report from the National Institute on Retirement Security, the typical working American has no retirement savings. And when that happens, workers are stressed, the distraction reduces productivity and the promotion pipeline gets blocked by employees who feel unable to retire on time.
Fortunately, workers say they want employers' help. In poll findings released last year, 75% of respondents said they wanted help calculating how much to save for a secure retirement. A similar amount said they'd be open to help calculating how much to anticipate spending each month in retirement, help planning for health care expenses in retirement and help with comprehensive financial planning.
To that end, many employers have rolled out financial wellness programs; but despite workers' reported interest, 2018 research from Russell Investments showed that employee participation is lagging. Engaging employees in such programs will require behavioral changes, the authors said — a psychological approach used in health wellness programs. Employers can take several steps to achieve this, according to the report, from framing money management in a positive light to gamification.
