An estimated 79% of Americans work for an employer that provides a retirement plan to at least some employees.
Yet new research suggests only 41% of those employees contribute to their retirement plans.
They’re either not eligible or not enrolled, according to a recent working paper from the U.S. Census Bureau that examined 2012 W-2 tax records.1
Employer-sponsored defined contribution plans (which include 401(k) plans) are valuable benefits aimed at helping workers save for retirement. A 2013 Aon Hewitt survey found that “for three-quarters of employers, a defined contribution plan is the primary source of retirement income for their employees.”2
If you are lucky enough to have access to a 401(k) or other employer-sponsored plan, take advantage of it! Here’s where to start:
Get started. Don’t let the legalese and financial jargon in the paperwork deter you.
Review your company’s retirement options to make sure you understand them and are using the ones that make sense for you. If you need help answering questions or more education around maximizing your workplace retirement plan, reach out to a professional.
Take full advantage of your company match program.
If your employer offers a 401(k) or another defined contribution plan, they want you to save for your retirement. One way of encouraging you is by offering a match. For every dollar you contribute, they’ll match your contribution up to a certain amount.
Our 2015 report3 found that the typical employee leaves $1,336 of unclaimed match contributions on the table each year. How? By not saving enough in their 401(k) to receive the full company match. If your company offers a match, contribute enough to reap the full reward.
Retirement may seem far away, but there’s a good chance that it will sneak up faster than you’d expect. Even 68% of adults age 55 or older admit to procrastinating on retirement savings.4 This delay can have staggering effects. Consider the following scenario:
An employee who starts contributing 6% of their pay at age 25, takes advantage of a 3% 401(k) employer match, and has typical market returns could have close to $500,000 at age 65. Yet, if that same employee started saving at age 35, they would have to save 11.69% of their salary to reach $480,000 at 65.5
Procrastination can be costly, so get started saving early.
Don’t have access to a retirement savings plan through your employer? You still have options.
Think about contributing to an Individual Retirement Account (IRA). An IRA is a place to put your money so you can invest it while saving for your retirement. Unlike employer retirement plan accounts, an IRA is an account you set up on your own with a bank, brokerage firm, or a mutual fund company.
If you’re eligible for an employer-sponsored retirement plan but aren’t contributing to it, don’t delay — get started now! Following the simple steps outlined above can start you off toward a more solid financial future.