Is your retirement account working for you?

I recently heard a shocking fact that needs to be addressed: Over 65% of all Americans aren't saving enough for retirement! In simple terms, if one retires at 65 years old, he/she should have 10 times the final year's pay saved for retirement. The problem is not necessarily that people refuse to save, but that they do not know how much to put away.

It is the job of the company, as a fudiciary, to provide advice on how to plan for retirement. Providing online tools for "self planning" is not the answer, but this is unfortunately how this fudiciary responsibility is typically "met". In 98% of the magazine and newspaper articles that I have read over the years, the above rule of 10 is never stated. This seems to be because people just don't have a firm grasp of how retirement works.

Another fact may even be more concerning than the previous one. Over 33% of people that participate in company sponsored 401(k) plans, do not contribute enough to receive the full company match! This is free money that people are choosing not to accept! Firms that offer a 401(k) plan are required to provide a match (usually between 2 and 5% of the employees salary), but only if the employee contributes an equal amount.

The fact that the majority of people are under-saving for retirement, yet many are not taking advantage of the company match, leads me to an obvious conclusion: If people would contribute more to their 401(k), at least meeting the amount needed for a full company match, their retirement savings would increase exponentially! The additional employee contribution would be matched by the employer and the investments would do the rest.

For more advice on retirement planning contact me through my website at www.eradviser.com