I've got a confession to make. I didn't know my 401(k) contribution rate until I went digging for it in my portfolio materials.
Now that I know it (it's 4 percent), and I know I'm consequently going to be short on my income goal, I'm not too hard pressed to change it. Mainly because, like a lot of other savers, I feel I've got time to make up for it. That, and nobody's ever told me right now is probably the most crucial time in my life to make sure I have a viable plan.
But hey, at least I'm saving something, right? If only it were that simple.
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The "I'm saving because it's right to save for retirement" motto is only a security blanket up until I realize exactly how far my efforts to save are going to take me. No one is going to hold my hand until I'm 65. I owe it to myself to actually open up those periodic portfolio updates, examine hypothetical investment strategies, factor in my health and lifestyle expenses, and consider how raising my contribution rate even 1 percent a year will add up over time.
So while I can cover my own bases, isn't there more that can be done by the people who encourage active plan participation in the first place? In a new BenefitsPro article, David Wray, president of Plan Sponsor Council of America admits the 3 percent default rate that companies set for new participants is not enough, but it's a rate employers can live with. That's because they know it's low enough to get workers to actually save something without them feeling like they're giving up too much money that could be used for more immediate needs.
Sure, employers would be willing to go higher on the default rate, maybe 10 percent or more, but even I'm reluctant to sock away that much in this economy. Employers know that if the contribution rate plateaus for workers, soon enough no one will be want to participate.
We may slowly be sabotaging ourselves with a low contribution rate, but I can't discredit the fact that the employer also plays an important role in retirement security. Maybe I'm too optimistic, but I believe a small push in the right direction from can be motivational.
In fact, Financial Finesse, a financial education company, finds "92 percent of employees who participate in retirement education make a major change to their retirement plans within 30 days of receiving the education. Workers change what they are investing in, increase their deferral rate or open up an IRA to supplement their company-sponsored plans."
Unfortunately, only 4 percent of plan sponsors even measure whether their employees are on track to have adequate retirement income, let alone educate them, according to Principal Financial's 2011 Retirement Readiness Survey.
I have to ask the question then, does anyone care about my retirement but me?
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