More than 60 percent of Americans who participate in their 401(k) retirement plans at work are adding more dollars to their debts than they’re socking away in those plans, according to HelloWallet’s analysis of recent federal data. This shocking statistic suggests the need for some serious financial planning. Yet the vast majority of people in a recent survey said making a financial plan would not be among their 2014 resolutions. Why not? Many said they “don’t make enough money to worry about” a financial plan, according to Allianz Life Insurance Company, which conducts the survey.
Okay. But if you feel unable or unwilling to write up a full-blown plan, perhaps you’ll consider one small step:
To nudge people to save more, some companies are automatically increasing their employees’ 401(k) contributions every year. There’s no reason you can’t take the initiative yourself and start contributing to a 401(k) or IRA or raise your current contribution by 1 percent or 2 percent.
Yes, this will take money out of your pocket. But remember that a one dollar contribution doesn’t feel like a dollar lost, since contributions are deducted from your pre-tax salary or wages. It’ll feel more like 75 cents or 85 cents, depending on your tax bracket. And depending on how old you are and how you invest, that dollar could mean many more dollars in savings when you retire.
A little more from your paycheck can translate into greater financial security in the future.
Source: Squared Away Blog; Financial Behavior: Work, Save, Retire