Today marks the start of America Saves Week, an annual occasion aimed at inspiring Americans to set realistic savings goals, make a plan and save automatically. While it’s wise to think about forming good financial habits all year round, this is an especially great time to revisit your planning efforts and make sure they’re helping you work towards your financial goals.
Each day of America Saves Week, you’re encouraged to focus on a specific aspect of your overall financial health, like debt or tax planning, and take steps to improve your savings efforts. On Wednesday, savers like you from all over the country will be turning their attention to retirement.
Whether retirement is decades away or right around the corner, it’s a major part of your financial future and should be top-of-mind throughout your career. The 2016 America Saves Week survey* revealed that just 52 percent of households are saving enough for a retirement with a desirable standard of living. Clearly, many of us may need to do more to meet our retirement savings goals.
One of the best places to start is with your workplace 401(k), which another recent survey** found to be the largest or only source of retirement income for most people. Knowing how to make the most of this important retirement savings vehicle may help you prepare for the future.
First Things First: The Employer Match
My number one savings suggestion – even when you have multiple competing financial priorities, like credit card or student debt – is to save enough in your 401(k) to take advantage of any matching dollars that may be offered by your employer. Most workplace 401(k) plans offer some form of matching contribution, and you don’t want to miss out on those dollars.***
Save a Little More
While saving enough to get the full 401(k) employer match may be a great starting point, the reality is that the contribution percentage that’s eligible for the full match may not be enough to help you reach your long-term retirement savings goals. One way to get closer to meeting your goals is to increase your savings rate over time by a percentage (or two) at specific milestones or intervals, such as after your performance review or on your work anniversary.
Focus on Fees
Another way to save while contributing to a 401(k) is to be thoughtful about the fees associated with your investments. Look closely at the individual funds available in your plan with an eye toward the investment management fees they charge. Index mutual funds and exchange-traded funds can be good low-cost options, as they typically have low investment management fees.**** If your plan offers these types of funds, this may enable you to put less of your retirement savings toward fees and potentially put more into your retirement plan account.
Ask for Help
Knowing how much to save and how to allocate your 401(k) dollars can seem a bit daunting, but you’re certainly not alone. Many 401(k) plans offer access to third-party, professional advice. These managed account services can help you formulate a savings plan that takes into account a number of personal data points, like time until retirement, marital status, other sources of retirement income and more. If your plan doesn’t include a personalized advice service, there are plenty of online resources***** available as well.
Again, retirement requires a long-term savings strategy, and a 401(k) requires attention and maintenance throughout your career. But America Saves Week is a great annual reminder to focus on your financial choices and how you can set yourself up for the future. Encourage friends, family and coworkers to participate, too, by sharing your savings tips along with the hashtag #ASW17. Happy America Saves Week, everyone!
* You will be accessing a third party website. Please note that Schwab Retirement Plan Services, Inc. does not endorse this site or any of the products and services you might find there.
** This online survey of U.S. 401(k) participants was conducted by Koski Research for Schwab Retirement Plan Services, Inc. Koski Research is neither affiliated with, nor employed by, Schwab Retirement Plan Services, Inc. The survey is based on 1,000 interviews and has a 3 percent margin of error at the 95 percent confidence level. Survey respondents worked for companies with at least 25 employees, were current contributors to their 401(k) plans and were 25-70 years old. Survey respondents were not asked to indicate whether they had 401(k) accounts with Schwab Retirement Plan Services, Inc. All data is self-reported by study participants and is not verified or validated. Respondents participated in the study between June 2 and June 8, 2016. Detailed results can be found here.
*** Your company may have a maximum match as well as other restrictions. The employer contribution is paid on a pre-tax basis and may be taxable at withdrawal.
**** Fund operating expenses represent the total of all of a fund’s annual fund operating expenses. Management fees are one component of the fund operating expenses. Index funds generally have low management fees because they don’t have to pay investment managers to actively manage underlying investments.
***** Schwab MoneyWise® is provided by Charles Schwab & Co., Inc. Schwab Retirement Plan Services, Inc. and Charles Schwab & Co., Inc. are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation. Schwab Retirement Plan Services, Inc. is not a fiduciary to retirement plans or participants and only provides recordkeeping and related services with respect to retirement plans. Brokerage products and services are offered by Charles Schwab & Co., Inc. (Member SIPC, www.sipc.org).
The information contained herein is proprietary to Schwab Retirement Plan Services, Inc. (SRPS) and is for general informational purposes only. None of the information constitutes a recommendation by SRPS. The information is not intended to provide tax, legal, or personalized advice. SRPS does not guarantee the suitability or potential value of any particular investment or information source. Certain information provided herein may be subject to change.
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