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28 Trillion Smart Decisions

By Christina Kilroy

October 22, 2018

Have you ever done one small, smart thing that ended up making a huge difference in your future? I’m not talking about blind luck—like buying a ticket that turns out to be the winner in the (currently) $1.6 billion Mega Millions. No, I’m talking about small, smart decisions that can materially affect us later in life.

For some retirement savers with a workplace defined contribution plan, like a 401(k) or a 403(b), that decision may be enrolling or electing to automatically escalate contributions. For others, it may be rolling over an old 401(k) to an individual retirement account (IRA) to consolidate and simplify their retirement savings. These decisions add up—and for working Americans, they add up to more than $28 trillion saved for retirement. As far as I’m concerned, that’s 28 trillion small, smart decisions.

This National Retirement Security Week, October 21 to 27, we’d like to encourage everyone to take one small, smart step for their financial future—whether you’re just thinking about getting started, or whether you’ve already made it a priority to save for retirement. Find one that makes the most sense for you and take a little time to do it this week.

  • Enroll. Your employer can walk you through how to enroll, and it’s probably easier than you think. Even if you don’t save much to start, it’s important to take the first step—you can always increase your contribution rate in the future.
  • Make sure you’re maxing out the employer match. Three out of four 401(k) plans include some kind of employer contribution, which is often based on how much the employee contributes. Your employer’s contribution is free money for you. Find out how to get the most out of your plan’s match, so you don’t leave money on the table.
  • Save for retirement, even without a 401(k). If you don’t have a workplace 401(k) or similar plan, you can still save money for retirement. IRAs are a great option because they offer similar tax advantages as employer-sponsored retirement plans.
  • Preserve your nest egg. If you’ve changed jobs recently, don’t forget about the retirement savings you’ve already set aside—and don’t be tempted to cash out your 401(k), even if your balance is small (you’ll face a major tax bill, including a 10 percent penalty on the taxable portion of your withdrawal, if you do). Instead, consider rolling those funds into an IRA or moving them into your new employer’s plan.
  • Contribute now to catch up. If you’re 50 or older, you can make “catch-up” contributions to an IRA or 401(k). For traditional and Roth IRAs, older savers may contribute an additional $1,000, for an annual limit of $6,500. Eligible 401(k) savers may contribute an additional $6,000.

Put together enough of these small, smart decisions, and you can put yourself on track for a better, more secure retirement.

Find even more tips at https://factsonretirement.org/tips.html.

Tina Kilroy is vice president of the ICI Education Foundation.

Permalink: https://www.ici.org/viewpoints/view_18_nrsw_smart

TOPICS: Investment EducationMutual FundRetirement ResearchSavingsShareholderTaxes

Popular 529 Savings Plans Expand to Reach Students of All Ages

By Christina Kilroy

May 29, 2018

Today, on May 29—“5/29”—we mark 529 College Savings Day. Many people interested in saving for a child’s or grandchild’s future college costs are using targeted savings vehicles called 529 savings plans. The plans, which have grown in popularity over the past decade and a half as a way to save for a family member’s college expenses, may now also be used to cover tuition for elementary and secondary education....

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TOPICS: Investment EducationSavingsTaxes

A More Accurate Evaluation of Retirement Plan Participation

By Miriam Bridges

May 2, 2018

What’s the actual participation rate of Americans preparing for retirement through a workplace retirement plan? It’s an important question, and one that ICI economists Peter Brady and Steven Bass shed some light on in their new analysis of tax data, “Who Participates in Retirement Plans, 2014.”

The retirement plan participation rate—often used to evaluate the performance of the US voluntary employer plan system—understates the true scope and importance of these plans. In their careful analysis, Brady and Bass give two reasons for this understatement...

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TOPICS: Retirement PolicyRetirement ResearchSavingsTaxes

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