According to a study from Schwab Retirement Services, 52 percent of employees say they don’t have the time, interest, or knowledge to properly manage their 401(k) plans.
The survey, which polled more than 1,000 employees enrolled in 401(k) plans, also found that:
- 73% spend less than eight hours a year managing their retirement
- 56% do not review plan-related education materials they receive
- 83% say they want professional investment management from their employer, but only 10% take advantage of investment management advice when it is offered.
Most employees who invest in a 401(k) also fail to understand the basic fees associated with their retirement fund. Nearly one-third (30 percent) didn’t know they pay fees for their 401(k). Most fees fall into one of three categories: plan administration fees, investment fees, and individual service fees. Of the 70 percent that know they pay fees, 95 percent don’t know about investment fund operating expenses, and 67 percent don’t know about administration fees.
If you, like many of those surveyed, don’t feel like you have the know-how or time to manage your retirement, follow these three simple steps:
1. Start Saving NOW!
It’s the first and most obvious step for retirement: start saving your money. Experts advise you to start small and steadily increase the amount you save each month or year. Your best bet is to formulate a savings plan and stick to it. Set a savings goal and make it your priority to achieve that goal.
2. Estimate Your Retirement Needs
Financial experts estimate that you’ll need 70 percent of your salary to maintain your standard of living when you retire. Many companies, such as State Farm or Charles Schwab, offer free retirement calculators on their Websites. They will help you decide how much you need to save each year in order to retire comfortably.
3. Contribute to Your Employer’s Retirement Savings Plan
If you have the opportunity to contribute to your employer’s retirement savings plan, such as a 401(k), start contributing as soon as possible. Contributions to 401(k) plans are often tax deductible, and many employers offer matching contributions up to a certain percentage. If you forgo contributing to such a retirement plan, you’re essentially passing on free money.
For more information on how to save for retirement, you can request a number of helpful brochures from the Employee Benefits Security Administration by visiting www.dol.gov/ebsa.