401(k) in Southern California: How Does Your Town Stack Up?
posted by Fisher 401(k) July 25, 2017
We recently published an interactive map looking at the top 50 cities in the United States whose businesses offer the most retirement plans. In reviewing the rankings, California is featured prominently on this list, with seven cities in the top 48. Perhaps this should come as no surprise; California’s GDP is $2.6 trillion, which represents 14% of the nation’s total.
Looking at the map, it’s also hard to ignore the cluster of top 401(k) towns in Southern California. There, in a region defined by its sprawling urban areas and diverse industries, three cities made the list: Los Angeles, Long Beach, and San Diego. Anchors within the broader region, these cities offer a glimpse into a connected, thriving community—with a fiercely competitive job market to match.
Whether your city was featured on this list or not, one thing is certain for businesses in Southern California: 401(k) cannot be ignored. Good retirement benefits could mean the difference between attracting and retaining key talent, or losing it to the competition.
Southern California: A Closer Look
The 10 counties of SoCal boast a combined population of over 23 million. People come from all over the world to live, to work, and to pursue their dreams. That means steady economic growth across industries, and a competitive job market full of talented professionals. In March 2017 alone, Los Angeles County added 16,000 new jobs, and reached an unemployment rate of 4.6%, which is even lower than the national rate of 4.7%.
Much of the recent growth is in tech, an industry famously pioneered in Northern California’s Silicon Valley. Investors and economists are taking notice of the potential for rapid expansion in the southern part of the state, but are also keenly aware of what employers must do in order to attract the region’s top talent. As quoted on socalTECH.com, Eric Larson of Riviera Partners says, “It doesn't matter if the cost of living in Southern California is less than the Bay Area; a top quality candidate is going to want to see a comp package comparable to what he or she is already receiving.”
Attracting Talent in Southern California with 401(k)
Part of that compensation package must be retirement benefits. In fact, 79% of employees say that they’d prefer to work for a company that offers 401(k). Nationwide, small businesses are learning that they have to offer a 401(k) or other retirement plan to attract top talent. In a place like Southern California, however, where competition is fierce and major cities represent some of the highest rates of 401(k) plans, it’s not enough to simply offer a plan. To stand out, employers might consider plans that feature:
- 401(k) Match: This common plan feature involves employers matching their employees’ contributions to the 401(k) plan, usually up to a certain percentage of the employee’s salary. In most cases, matching employer contributions are pre-tax, adding a significant amount to an employee’s compensation package in the form of additional retirement savings. The Bureau of Labor Statistics reports that 51% of employers who offer 401(k) offer a match of some kind, and only 10% offer 6% or more of an employee’s salary. However, more employers in competitive labor markets—like Microsoft and Host Hotels—are starting to spend more on higher match rates, matching up to 8% of an employee’s salary or even all of an employee’s contributions up to federal limits.
- Educational Resources: Nearly half of employees aren’t confident in their ability to make investment decisions, and 71% of those we polled failed the Fisher Investments 401(k) quiz. That means most employees aren’t prepared to maximize their retirement plans, and need help understanding things like contributions and investing. In order to give your employees and candidates the greatest benefit, choose a provider that will offer plenty of support to help them develop a strategy that’s right for their retirement goals. Look for online resources and investment calculators, and for one-on-one investment support to empower employees to save and invest with confidence.
- Flexible Investing Solutions: Just as some employees will require educational resources to better understand their plans, others will be prepared to take a more active role in their retirement plan and create their own ideal mix of investments. For that reason, offer a plan that includes a range of investing solutions to match your employees’ different investing styles to help them save. That way, employees with different levels of interest or investing experience will find a solution that’s right for them. Some will prefer to choose their own investment lineup, some will want to have some input but will require help, and others still won’t want to have anything to do with fund selection.
As Southern California’s growth continues, and as area businesses continue to embrace 401(k) plans as key benefits, we can likely expect places in Orange County, Los Angeles County, Ventura County, San Bernardino County, Riverside County, San Diego County, Santa Barbara County, Kern County, Imperial County, and San Luis Obispo County to feature on the list of top 401(k) towns. Now is the time for you to consider how you can leverage competitive retirement benefits and financial education to ensure your business keeps up.
5Fisher Investments 401(k) Retirement Readiness Poll