Retirement savings: It's your responsibility

Saks, Starbucks, Motorola, Sears. These are just a few of the employers who have recently announced plans to change or freeze matching contributions to their employees' 401(k) retirement plans. More than three dozen companies have taken this step since last June, according to the Pension Rights Center, a consumer group dedicated to retirement security.

Despite the small number of companies, media attention has magnified concern that employer contributions may become a benefit of the past. It's a notion that retirement experts reject, however.

"During the last recession in 2001-02, a number of employers cut back on their 401(k) matches, but reinstated them when the economy recovered. And I expect the same in 2009," says Alice Munnell, director of the Center for Retirement Research at Boston College. "Reducing employer support for 401(k) plans is a recession-driven action, not a reflection of a shifting commitment to retirement support."

Last month, just 3 percent of companies reported reducing 401(k)/403(b) matches, according to a survey of cost-cutting measures at 117 firms. The poll by Watson Wyatt, a global consulting firm, also revealed that 7 percent were planning such action in the next 12 months.

"The number of respondents taking some type of HR action in response to the economic downturn – imposing hiring freezes [47 percent of companies], freezing salaries [13 percent] – is notable," says Lisa Arko, a senior retirement consultant for Watson Wyatt. "We counsel companies to take other actions, such as reducing job training or travel, before freezing 401(k) matches, as employees are extremely sensitive to their retirement security."

That sensitivity is reflected in another poll released this month by the National Institute on Retirement Security. It found that 83 percent of Americans are concerned that they will not have sufficient retirement funds when they retire. More important, 84 percent of employees listed employer contributions as the most desirable retirement-plan feature. In addition, most respondents (63 percent) wanted to control how they invested their 401(k) savings, yet 58 percent viewed 401(k) plans as "gambles," acknowledging that their lack of investment knowledge may risk their retirement portfolios.

American workers may have soaring expectations that President Obama will fulfill his campaign promises of retirement security for all employees. But don't wait for legislative action to repair your fractured nest egg. You can take steps now with these strategies:

•Take an active role as manager of your 401(k) by developing an "investing" not just a "saving" mentality. This step requires you to set priorities, choosing assets that balance risk with return and liquidity with long-term investment. Obtain an accurate and complete list of plan expenses. If excessive fees are being charged by your plan administrator, seek other options and suggest them to your employer. The largest 401(k) database can be found at the Employee Benefit Research Institute website (ebri.org).

•With the stock market having lost 40 percent of its value since its peak in October 2007, recalculate your retirement savings goals and resize your retirement dreams, if necessary, to match your reduced retirement nest egg. You can find several helpful retirement calculators at the AARP website (aarp.org/money). They can show you how much you need to save to have the nest egg you want in retirement as well as how much income your current nest egg can provide when you retire. Free financial advice and retirement guides can also be found at the US Treasury website at treasury.gov/financialeducation.

•Reevaluate how long you must work until you retire. If seeking employment or a new career, use the resources at the Department of Labor website (dol.gov) for information on growth industries, job training, as well as unemployment and retirement benefits.

•If you become unemployed or your company shuts down, roll over your 401(k) within 60 days to another tax-deferred account. Ask your employer to wire the money directly to the new account. Those younger than 55 should not cash out their 401(k), or they will pay income tax on any withdrawal and a 10 percent penalty. Learn more about how to protect your 401(k) savings at 401k.org, the website for at the nonprofit Profit Sharing/401k Council of America.

•Broaden your retirement investments. If you have lost your employer match, reevaluate IRA savings. The maximum IRA contribution for 2009 is $5,000 ($6,000 if over 50). Consider the potential tax advantages of a Roth IRA.

• Dr. Kathleen Connell is a professor at Haas Graduate Business School, University of California, Berkeley.