Employers can be very frustrating. They may not give us as much vacation time as we want. They don't want us to work comfortably in the office in pajamas and fuzzy slippers. They rarely pay us as much as we think we're worth. Yet many of them do treat us very well in some regards. Take 401(k) plans, for instance. Many employers not only permit us to sock away pre-tax money in these nifty retirement plans -- they also offer to match our savings to some degree. Google
The folks at the Profit Sharing/401(k) Council of America (PSCA) recently released a report praising the power of 401(k)s and lamenting the fact that too many ignore them. PSCA President David Wray explained, "An employee who takes full advantage of their employer's matching contribution can increase their retirement savings by as much as 50%.... That's free money that could be worth $230,000 or more after 20 years of saving in a 401(k) plan. That $230,000 could buy a participant a 20-year payment during retirement of almost $23,500 per year (assuming 8% rate of investment return)."
Applying the findings of an AonCorp.
This is more than just discouraging. It's potentially tragic. It's no secret that the future of Social Security is uncertain. And you've surely noticed that few companies these days offer traditional pensions. More than ever, it's becoming the responsibility of the individual to save for retirement.
Look into what retirement benefits your employer offers and take advantage of them as much as you can. If you can sock away 6% of your $40,000 salary into a 401(k) plan annually, that's $2,400 less income that you'll be taxed on, and $2,400 more that will be invested for your future. If $2,400 grows at 8% per year for 25 years, it becomes $16,400. If your employer matches 50% of your contributions, you'll get $1,200 of free money for the year, raising your total deposit to $3,600 and its potential end result 25 years later to $24,650.
Don't ignore planning for retirement. It doesn't have to be painful. Master it on your own, or let us help you. Check out some of our articles below, and consider taking advantage of a free trial to our nifty new Rule Your Retirement newsletter.
- The Power of Pensions
- How Much Will You Need to Retire?
- Why You Hate, and Like, Social Security
- Do You Want to Work Forever?
- I Eat My Children's Scraps
Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.