Personal finance: 7 ways employers set up millennials to fail at retirement saving
You’ve got a workplace retirement plan. Fabulous! But there’s plenty your employer likely isn’t telling you — or doing for you —that’s costing you money. Here’s how your employer might be letting you down:
• We probably set you up to leave money on the table. Most workplace plans offer an employer-matching contribution, based on some sort of formula tied to what the employee contributes. A common setup is that an employer matches 50% of a worker’s contribution up to a limit. A common limit is 6% of salary; if the employee contributes at least 6% of salary, the employer will earn the maximum match of 3%.
But many employers set your default contribution rate too low to earn the maximum match. If the plan set you up to contribute 3% of your salary, your match would be just 1.5%. Callan, a benefits consulting firm, reports that just four in 10 plans chose a default contribution rate for employees that would ensure the maximum match. Lesson: Make sure you contribute at least enough to earn the maximum match. Not sure? Ping HR ASAP.
• You’re not saving enough. We’re not exactly helping. A rule of thumb is that someone in their 20s and 30s needs to save at least 10% to 15% a year to have a good chance at ample savings come retirement. According to a Transamerica survey, 55% of millennials contribute less than 10%.
• We might not offer a simple feature to help you save more. An ...
More on: www.duluthnewstribune.com