If you’re under the age of 40, then retirement might seem like that far-distant place you hope to maybe get to one day, if you can save enough money or you win the lottery.
So it’s certainly easy to put off any decisions about saving for retirement, especially if you’ve got other short-term, pressing financial matters, like paying off debt, having children or saving for college.
But once you hit a certain point, you realize that the age at which you’re “supposed” to retire is getting closer and closer, and if you don’t have money in the bank, you’ve got a long game of catchup ahead of you. I’m sure you know people who are close to retirement age who don’t have the money to call it quits and enjoy the peaceful life. Is that what you want to happen to you?
If you want to be able to retire, you need to start saving for it – today. The government doesn’t have enough money in Social Security to sustain that system, and with pensions becoming a thing of the past, more than ever it’s up to you to save for your own retirement.
Thankfully, some employers are helping their employees automatically save for retirement, by doing things like automatic enrollment in 401(k)s and automatic escalation of contributions when salaries increase, according to a new study from Lincoln Financial Group.
The study found that 94% of plan sponsors recognize the success of automatic enrollment features in helping them address their plan-related goals and that these features drive higher participation and deferral rates along with better investment performance.
Other key findings include:
85% of plan sponsors reported that automatic features are especially effective in helping participants who consider themselves less educated on retirement matters.
Plans with automatic escalation experienced deferral rates of 8% or higher compared to the average deferral rates of 4% or less for the majority of plans in America.
As someone who has been automating my retirement contributions for years, I can tell you it’s one of those things where you simply set it and forget it.
If you’ve investing in a Target Date Mutual Fund, it will rebalance itself for you automatically (though it often comes with a slightly higher price tag than an index fund). If you’re managing your own funds in a Roth IRA, take a look at your allocation once a year, re-balance, then continue to dollar cost average. (Here’s the whole chapter on automating your long-term savings from Automatic Finances).
If you’ve read this far, you’re one of two people: you love to read about personal finance and investing (like me), or you haven’t started investing for retirement yet. Get started today, and automate it. You future self will thank you.
