It’s so easy to focus on the here and now when navigating your professional life that you might give little consideration as to how you will live during retirement. Sure, you may have visions of traveling cross-country in an RV or steering your golf cart across hilly greens at dawn, but what does it take to make those visions a reality? With mortgage payments, childcare costs, and future college tuition fees, the retirement dream seems like a distant fantasy.
If you’re like most people, you think your employer has you covered with the usual retirement savings program, an auto-enrollment feature, and gradual contribution increases on an annual basis. But are you really making the most of what your employer is offering you by leaving all the decisions to the plan administrators? If you rely on the plan defaults, you might find yourself coming up short at retirement time.
How do I make the most of my employer’s retirement plans?
- If your employer offers a 401(k), 403(b), or 457 plan with an employee match, be sure to enroll and max out the employee match as soon as possible. Many companies will match your contribution dollar for dollar up to a certain percentage. While there are vesting requirements based on tenure, not taking advantage of this benefit is like rejecting free money.
- Consider what investments are available in your 401(k), 403(b), or 457 plan. Often the retirement plan administrator your employer selects will provide you with information or even a consultation to determine which investments, usually mutual funds, are best for your risk tolerance and retirement target date.
- Don’t put all your eggs in one basket. Many companies offer employees the opportunity to invest in company stock usually at a discount through stock purchase plans. While it’s not advisable to make company stock your sole vehicle for retirement savings, it’s not a bad idea to invest in the place where you work, if possible. If the company is good enough to spend your time, talent, and skills, why not become a stronger partner in the company’s future through investing a portion of your retirement savings in the company.
- Take advantage of your employer’s Health Savings Account (HSA) program, if available. While generally not viewed as a retirement account, the purpose of an HSA is to offset the rising cost of healthcare as you age. Usually accompanied by a high-deductible health insurance plan, HSAs are funded with pre-tax dollars to cover qualified medical expenses now or in retirement. The funds in your HSA can also be invested for long-term growth and many employers offer contributions based on healthy lifestyle practices such as annual cholesterol checks, being a non-smoker, or successfully completing smoking cessation or weight-loss programs.
If you take the time to review those employee benefit packets rather than relying on auto-enrollment, your retirement fantasies might be waiting for you just over the investment horizon.