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Making the most of your 401(k) and retirement accounts

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Fox 2 Money Monday

Many companies are once again matching employees' 401k contributions after suspending or slashing matches during the recession. 

In 2011, the percentage of companies making those matches increased to 95.5%, up from 91% in 2010, according to survey results released by the Plan Sponsor Council of America.

However, savings rates are down. Only 14% of Americans are confident they will have enough money to live comfortably in retirement, up only slightly from the low of 13% reached in 2009, according to a 2012 survey by the Employee Benefit Research Institute.

Mark Wayne, President and CEO of Clarkston-based 401(k) plan advisor Freedom One Financial Group joins Fox 2's Murray Feldman to explain how you can get into the driver's seat of your 401K.

What you need to do now before the end of the year to boost your retirement savings and start 2013 right:

If employer matches are up—why aren't we seeing more Americans feeling confident about their retirement savings?

  • While company matches are great—they are not the driving factor in helping Americans feel more secure in their retirement.
  • Most folks save about 3% and some numbers suggest that the average person needs to save close to three times as much.
  • We are seeing employers who are stretching out their match—while not spending any additional dollars—but helping their employees push themselves to save just a little bit more each month.

Employees are a reason employers change 401 (k) policies. What should employees be looking for before the New Year?

  • Check if your company offers auto escalation.
  • This means that each year employees agree to have their deferral rate increase—unless employees object, which they rarely do.
  • We are seeing more employers offer this feature—and employees take advantage of it
  • At one client, they had a 70% acceptance rate out of 900 people
  • The lesson is that people prefer to be guided when it comes to saving for retirement—while they can do it on their own, handing out a brochure in the company's lunch room isn't enough.
  • Employees take well to in-office retirement guidance—and employers are recognizing that being unprepared for retirement is an HR issue. If employees aren't adequately prepared for retirement, they won't retire, stopping younger employees from advancing and creating a retention issue.

 What about taxes? What can folks expect going into 2013?

  • We know that tax rates will go up.
  • The reason to save in a 401(k) is more important. When tax rates are higher, it is critical to save money that is tax-free.

 What other tips can folks implement to get in the drivers seat of their 401(k)?

  • The number one thing employees can do is ask for advice
  • Individuals who ask for advice vs. those who go at it alone see on average a 2-4% return per year, by seeking professional counsel when it comes to their finances
  • We see the results in the numbers.
  • On average, deferral rates are 9% higher among those who attended one-on-one meetings regarding their 401(k) vs. those who attended group meetings.
  • Also, check your statements. We've talked before about the compliance changes that went into effect earlier this year.
  • 80% of employees think their plans are free—now employees will see their employer's plan fees itemized on their statement—so it is imperative to review it.
  • A very small shift in what you are saving— even one percentage point—can greatly boost your balance at retirement;
  • When you get a raise, pay yourself in the future by raising your retirement savings contribution; Most employees tell our employee educators they don't notice the small shift and continue to increase their percentage as a result;
  • We will see more legislative discussion this year about fiduciary responsibilities. This is great for consumers. It means that they will continue to see a difference in the market between investment advisors and brokers. This means less conflict when it comes to the management of 401(k), which is a great thing for consumers.

More information from Mark Wayne and the Freedom One Financial Group, including how to review your 401(k) plan, CLICK HERE>>

 

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