***The content in this post is from a Chicago Tribune article I was interviewed for. I did not write the content.
Maxing employee retirement benefits
Many Americans 50 or older will need to put saving on a fast track to retire comfortably at age 65.
A great way to do that is to ensure they are seizing every employer-provided opportunity.
According
to Rob Austin, director of retirement research at Lincolnshire-based
Aon Hewitt, 82 percent of those 50+ take advantage of their employers’
401k plans.
“So right
off the bat, 18 percent are not participating at all,” Austin says. “We
see non-savers across every age demographic. Some of that is due to
people thinking they can’t afford to save, or not knowing the steps they
need to take to participate.
STEP BY STEP
Maximizing
retirement savings is entirely possible with a two-step approach. The
first step is participating in the 401k plan, Austin says. Step two is
to “make sure you’re saving at least robustly enough to qualify for the
full employer match,” he adds.
“Eighty
percent of those individuals participating in their plans are saving
at a rate where they receive the full match from their employers. The
pessimistic angle is that one in five — 20 percent — are saving below
the level at which they should be saving to receive dollars their
employers are offering them.”
Sev
Meneshian, president of Public Retirement Planners in Evanston, is one
who observes this all too often. “A lot of people don’t take advantage
of a 401k match, and it absolutely kills me when I see that,” he says.
“Most of the time, if you put in three percent, (employers) will match
that.”
Why don’t
employees take advantage of what is essentially free money? Some argue
they will have to work until they die anyway, so they don’t see the
point, Meneshian says.
In
other instances, a husband and wife will max out the higher earner’s
401k contribution, and forget about the lower earner’s 401k plan.
That’s
a big mistake, Meneshian says. “They’re almost literally leaving money
on the table by not taking advantage of that match.”
Other reasons for non-participation is the plan and match aren’t fully explained or the belief they can’t afford to invest.
WATCH FOR FEES
Employees
should be watchful for high internal fees on their investment choices
within a plan, says Donald B. Cummings, Jr., managing partner with Blue
Haven Capital LLC, an investment advisory firm in Geneva.
The
higher the fees, the lower the return. Over a decades-long career
investing into a 401k, those lower returns could mean reduced retirement
savings.
Also
remember the lowest fees aren’t always best, Austin says. Compare the
fees with the returns earned. “If you pay higher fees, you may be
getting higher returns, in which case the fees are worth it,” he
reports.
OTHER WAYS TO SAVE
There
are other ways for employees to grow their retirement savings.
Employer-paid tuition programs are an example. Many looking to quit
their jobs at 55 or 60 will want to transition into second careers.
To
do that, they may need to pursue a degree. “They can sharpen their
skills, meet new people and possibly have (the tuition) be partially or
totally free,” Meneshian says.
Corporate discounts are another area too often overlooked.
“Few
people take advantage of them,” Meneshian reports. “Through my wife’s
employer, we save 10 percent monthly on our cell phone bills.”
One
final suggestion is that older wage earners do some belt-tightening as
they get nearer 65. Reducing the amount they’re living on by 10
percent can benefit them both in saving for retirement and during
retirement.
“If
people tighten their belts while they are still working and save a
little more, they get used to living on a slightly smaller amount,”
Austin says.
Securities
and advisory services offered through Ausdal Financial Partners, Inc. Member FINRA/SIPC 5187 Utica Ridge Road Davenport, IA 52807 563-326-2064 www.ausdal.com. Public Retirement Planners, LLC and Ausdal
Financial Partners, Inc. are separately owned and operated.
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