Promoting National Save for Retirement Week
By U.S. Congressman Sam Johnson
Washington,
Oct 12, 2007 -
One of the best deals in America is the free money that employees get when their employers match contributions to a 401(k) plan. This free money is a “no brainer” return that almost everyone has access to in their company’s 401(k) plan.
The only caveat is that you must contribute to the company-sponsored plan first and too many Americans don’t take advantage of this free money.
National Save for Retirement Week, October 21 – 27, is an excellent time to start contributing to your company’s retirement plan, increase the amount if you’re already participating, or begin planning for your retirement by filling out a “ballpark estimate” to compute your living expenses for your Golden Years.
Getting started
A 401(k) plan is a retirement savings opportunity created by your employer and funded by your pre-tax contributions. The money you contribute is yours to keep. The investment options are up to you to manage but enrollment is simple, easy and convenient. All you have to do is fill out a form and sign your name.
The amount you contribute to your retirement plan is automatically deducted from your paycheck. Payroll deductions make saving easier because you don’t have to remember to do it – that’s one less errand to run and, for most people, if the money is saved before the paycheck comes home you don’t even miss it. If you're afraid of starting off huge then consider starting with the amount needed to maximize the company match. After that, bump your contribution up each year by another 1% of your salary.
Most employers offer you a match for participating in the company retirement plan. A typical large-company plan matches 50% of your contributions, up to 6% of your salary, according to Hewitt Associates. While your company’s match may not be as generous, it still makes sense to take maximum advantage of this excellent retirement perk.
If you’ve been saving in your company’s 401(k) plan, this is a good week to take a look at your savings and do a fiscal checkup to see if you are invested in the best options available for your situation.
The earlier you start saving for retirement, the better! Your money will have more time to grow and earn compound interest. I’m not a financial planning expert, but I do know that taking advantage of free money offered by your employer is a simple way to get started on saving for your retirement.
It is never too late to start saving. One of the incentives for Baby Boomers to help them put more money aside for retirement is the additional $5,000 “catch up” contribution allowed to employees who are at least age 50. During these peak earning years, it is important to set aside more money because it will only have perhaps 15 years to let the most powerful force on earth – compound interest – get to work on it. And during these peak earning years, it is important to remember that each dollar you don't put into a company retirement plan is subject to taxes.
Learning from the statistics
According to a 2004 Retirement Confidence Survey by the Employee Benefit Research Institute:
Four out of 10 people aged 55 or older, have less than $100,000 saved toward their retirement when most people find that it takes almost as much to live in retirement as it does while working;
One out of four workers do not sign up for their employer's 401(k) retirement savings plan and only one in 10 contributes the maximum amount allowed;
Nearly half of all American workers don’t contribute enough to their company's 401(k) savings plan to get the full company matching funds; and
Almost 7 in 10 workers (68 percent) expect to work into retirement but 4 in 10 retirees end up having to leave the work force earlier than expected due to health problems, disability or company downsizing.
What are you doing today to plan for your future retirement?
Planning for your future
As the lead Republican on the Social Security Subcommittee, I’m on a mission to increase the awareness and share the importance of personal retirement planning. In fact, I authored the bill that created the first-ever National Save for Retirement Week. I hope you take just a few moments this week to look at your personal savings and see what more you can do to save for your retirement!
Saving for retirement can be an overwhelming task if left to the last minute. Just like most things in life, if you fail to plan, you plan to fail. Your retirement doesn’t have to be that way.
You can “Choose to Save.”
To learn retirement planning tips and to complete a “ballpark estimate” on how much it will cost you to live in retirement, go to choosetosave.org.
It’s time for you start planning your future retirement today!
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Johnson represents portions of Dallas and Collin Counties.
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