This article, entitled "Got a Raise? Congrats. Now Boost Your Retirement Contribution," comes from partner site Money Talks News.
Next time you get a raise at work, do your future self a favor and increase your personal contribution to your retirement savings plan.
Although that doesn’t sound as fun as splurging on a celebratory dinner and drinks or pampering yourself at a spa, it’s important to take steps now to ensure that you’re ready for retirement when the time comes. Unfortunately, it appears many Americans are failing to do just that.
More than one-third of Americans who contribute to an employer-sponsored retirement plan (36 percent) have never increased the percentage of their salary they contribute to their company’s plan. An additional 26 percent of workers have not increased their contribution in more than one year.
The majority of Americans are now dependent on employer-sponsored savings plans, like a 401(k), for retirement. Sadly, unless companies offer automatic enrollment – and many don’t – some employees delay signing up. In fact, nearly 25 percent of workers who aren’t automatically enrolled wait more than a year to finally sign up, Money reported in a story about the survey.
These delays may not seem like a big deal. But the lost returns over a lifetime of growth add up. Based on annual average returns of 6 percent and a like contribution rate over 30 years, a worker who enrolls immediately will accumulate nearly double that of a worker who starts two years later. Even a mere six-month delay is the difference between, say, $100,000 and $94,000, according to the research.
Other survey findings from TIAA-CREF include:
Teresa Hassara, executive vice president of TIAA-CREF’s institutional business, said in a statement:
Plan sponsors should be proactively looking for opportunities to engage directly with employees about their retirement savings, especially during pivotal times such as benefits enrollment season and after an employee receives a raise. Reaching employees at the right time with the right messaging can have a profound effect on retirement readiness.
I am privileged to work with a great financial adviser on my retirement plan. We meet at least once a year to go over my retirement savings and make any necessary changes to my contribution. We also discuss how my savings are being invested.
How often do you update your retirement contribution rate? Have you ever changed the way your money is invested?