The recession has compromised the ability of many investors to save for retirement.
These are the findings of an annual study performed by Hewitt Associates sampling nearly 3 million employees from 120 large companies. The study was based on data gathered in 2009. The study found that:
- 28.2% of workers do not contribute enough to receive the full company match from their 401(k) plan
- 7.1% of plan participants took an in-service withdrawal — the highest level since 2002
- 25.6% of workers had a loan on their 401(k) outstanding as of the end of the year, up from 23.1% in 2008
Clearly the economic times have had an impact on investors. Still, it’s important for plan participants to save and take full advantage of a company 401(k) match if it is available.
Investing in your workplace 401(k) is one of the most powerful ways to save for retirement. The contributions are made with pretax dollars, resulting in an immediate tax benefit. Your contributions would have to be made at a plan-specific rate in order to get the full company match. But the dollars invested by your employer represent free money — an important benefit you should not pass up. The company match can make reaching your retirement savings goals a lot easier.
Saving for retirement can be overwhelming when you consider the state of the economy and rising expenses in the future. That’s why it has become even more important than ever to have a plan.
Start by looking at saving for retirement as replacing income in retirement. Then calculate how to achieve that. By doing a careful analysis of your monthly budget, you will likely find many areas where you could cut expenses and fund that extra savings for retirement. It’s the little things that add up. To get help, consult a professional financial advisor.
Just taking those first few steps can make a difference in your success at reaching your retirement goals.
