July 9, 2018

It Doesn't Just Happen

The size of the balance in your 401(k) plan at retirement takes thought, planning, and action.

Often plan participants sit down with us for one-on-one meetings and want to know one of two of things: 1. Am I going to have enough?  or, 2. Am I in the right investments? It’s in answering the first question that often leads to a tough conversation or realization. People in general, just aren’t saving enough for retirement. It’s the 62 year-old, currently making $45,000 hoping to retire in 3 years with a $25,000 retirement plan balance. How on earth are they going to make it through what could be a 25-year retirement?

If the above scenario strikes a chord with you, don’t despair…take action! Like most things in life, retirement savings doesn’t “just happen.” It takes planning, forethought, and most assuredly, action. Likewise, doing nothing, and feeling hopeless will add absolutely zero to your 401(k) balance. Be resolved that going forward you are going to take action to change your retirement outlook!

For reference, here’s a look at the results of a recent study by Fidelity, showing workers’ average 401(k) balances by age:

Average 401(k) Balance by Age

(20-29) $9,900

(30-39) $38,400

(40-49) $91,000

(50-59) $152,700

(60-69) $167,700

(70-79) $160,200

 *Fidelity 2018

So, you ask, “What can I really do to make an impact?” 

Assuming your need is to be putting away more dollars; first, let’s find out when you can start making an impact. Each company retirement plan is different. Each with its own set of eligibility rules and operational parameters. Find out how often your plan allows you to modify your salary deferral election (the amount you want to take out of your check and put into the company retirement plan.) Some plans allow participants to change their deferrals every pay period….some once a month….some every quarter…some twice a year (Jan./July)…and some even only once a year. If your plan allows you to modify your salary deferral every pay period, that’s great! All the quicker you can make some progress! But, if you’re only allowed to make changes once a year (usually Jan. 1st) then you may have more time before you can jump into action. 

 “But,” you ask, “how much should I be deferring?” Well, there are a lot of ways to answer that question. I’d suggest for starters, sit down with a retirement plan/ 401(k) calculator and input some of your information. Most every plan has its own calculator these days…and others can be found very easily online. See what the calculator says about your current situation…it’ll project if you’re on target, or not.  But, regardless of what the calculator spits out, make sure you are capitalizing on your company’s match (if your plan has such a match.) It’s estimated that about 20% of US workers aren’t maximizing their plan’s company match. That’s free money up for grabs, so make sure at a minimum you are maxing the match. (Ex.: If your company matches 50% on the first 6% of salary you defer, make sure you’re deferring at least 6% to get the full match.) Also, keep in mind, just because you are maximizing the company match doesn’t mean you can’t or don’t need to do more.

Find out what the max is that you can contribute. Company retirement plans have fairly high limits (For 2018: 401(k)&403(b)-$18,500, SIMPLE IRA-$12,500, plus if over 50 years old, additional catch-up contributions can be made: 401(k) & 403(b)-additional $6000, SIMPLE IRA-additional $3000). Consult with the advisor on your plan if you have further questions about your deferral rate. Take a close look at your household budget, and from there come up with a game plan.

Map out a course that you’ll follow to get you closer to your savings goal. Maybe it’s increasing your contribution rate by 1% every quarter for the next 2 years…or maybe it’s fully maxing out your contributions in 5 years. Whatever it is, it will take some sacrifice now. You’ll be giving up something in the “now” in hopes that your future self will benefit. But, can you think of anyone better for you to be looking after?

Take some effort, and make your retirement savings happen.


Securities and advisory services offered through Cetera Advisors LLC, member FINRA/SIPC.  Cetera is under separate ownership from any other named entity.