You might not see it on your calendar, but Oct. 18–24 is National Save for Retirement Week. This event, endorsed by Congress, is designed to promote the benefits of saving for retirement and to encourage workers to take full advantage of their employer-sponsored retirement plans.
Some 53 percent of Americans report that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000, according to the 2009 Retirement Confidence Survey, sponsored by the Employee Benefit Research Institute.
From 1986 to 2008, participation in defined benefit plans among full-time workers in private industry declined from 76 percent to 24 percent, according to the Bureau of Labor Statistics. In many cases, these defined benefit plans have been replaced by defined contribution plans, such as 401(k) plans, which means that much of the responsibility of adequately funding retirement has shifted from the employer to the individual.
You must be proactive in building resources to achieve the retirement lifestyle you’ve envisioned. So, consider taking the following steps:
• Contribute to your 401(k) or other employer-sponsored plan. If possible, try to put in as much as you can afford to your 401(k) or other tax-advantaged, employer-sponsored plan, such as a 403(b) or 457(b). It’s a good idea to spread your 401(k) dollars among the available investments in a way that reflects your risk tolerance and time horizon. And as your income increases, try to increase your 401(k) contributions.
• Open an IRA. Even if you contribute to a 401(k), you are probably still eligible to open an IRA. A traditional IRA can grow on a tax-deferred basis, and a Roth IRA grows tax-free, provided you’ve had your account for at least five years and don’t begin taking withdrawals until you’re age 59-1/2.
• Rebalance your investment portfolio regularly. If you know you’re going to retire within the next five years, you may want to consider shifting some of your assets into shorter-term investments that may not be as susceptible to market volatility.
