Retirement is something that often crosses the minds of all hard-working Americans. No matter what someone’s job is, almost everyone looks forward to the day they can prop up their feet and live off the hard-earned money from their youth. If Americans lose the opportunity to start saving early for retirement, they end up working longer than they would like to, or sadly, beyond what their aging bodies can handle. This is why it is important to consider the future when planning a budget. When it comes to planning, the earlier the better — but starting to save today is better than no savings at all!
Retirement Planning
Many Americans look forward to retirement, but they don’t realize some of their money from today is crucial for a cushy one. According to CNBC, only 36% of adults think their retirement savings are on track. Moreover, the pandemic has affected the number of Americans that are prepared to retire as they contribute less, have stopped contributing or have taken funds out of their 401(k) accounts. One of the best ways to save for retirement is through a 401(k) — which is usually offered through an employer.
Work-sponsored Retirement
Employees with work-sponsored retirement plans are 15 times more likely to save for retirement. Could it be the easy accessibility or that they feel more encouraged to because colleagues are saving? One thing is for sure, work-sponsored programs have auto-enrollment, essentially helping them save before getting a chance to spend it. The benefit of setting up an employer-sponsored retirement plan is that the employer automatically deducts funds that are tax free. While working, employees can easily save pre-tax dollars through 401(k) programs for a secure future. But when employees are offered 401(k) plans, they also need to be educated on how to make the most of the programs.
Tips for First-Time Savers
All people investing in a retirement plan need to weigh their options carefully. When employers ask employees to fill out a bunch of paperwork, employees usually blindly listen and sign on the dotted line. The same goes for those who are investing in a retirement fund outside of their employment. Instead, new retirement savers should research the various options available to them, i.e. performance, risk factor, long-term goals etc. It is important to find 401(k) interests that match each individual. So it is crucial for workplaces to provide education on how to maximize retirement savings, so users don’t just set and forget it.
What Are Some Barriers To Saving?
Many employers with five to 150 employees are unable to provide 401(k) programs. Setting up 401(k)s can sometimes be expensive and include hidden fees that employers are unaware of. Human resources departments know that implementing retirement programs is sometimes a time-consuming endeavor. This is why 85% of small businesses do not offer 401(k)s as a benefit. Sometimes, hiring teams miss out on top-tier employees during recruiting because they will choose a large company that offers retirement plans over a small or mid-sized one that does not offer 401(k) plans. Small businesses who offer retirement plans recognize its importance as it supports recruitment, productivity and lower turnover.
Luckily, with technological advances and innovation in the retirement industry, some 401(k) plans are easy to set up. These companies are helping businesses of all sizes to access a crucial part of what should be all Americans’ financial priorities. New-age retirement allows for inclusivity in price and easy set up. When small or mid-sized companies offer retirement plans, this is the employee benefit new talent gets excited about. Employees working for small businesses without a retirement benefit should encourage their employers to look into these low-cost options.
State-sponsored Retirement Plan401(k)s As An Option
As a result of most people not being prepared for retirement, there are over a dozen states that now have mandates requiring employers to offer a retirement benefit such as a 401(k) or they have to opt into a state run solution. Depending on the state, the requirements are generally for employers with 5-10 employees or more.
According to research, the vast majority of companies prefer a free-market solution rather than having to deal with a state program. The benefits to the employer and employee are also minimal for the state programs as it’s nothing more than a forced IRA product for employees. In a true 401(k), the employer and employee receive numerous tax benefits that far outweigh the administrative costs of many 401(k) solutions.
Today, the market for retirement benefits is expanding and becoming more inclusive due to the increased emphasis on their importance. Technological advances in the industry are allowing even more inclusivity, so now there is no excuse for people to not save for their futures.
