Check in on Your Retirement Savings Plan in Three Simple Steps


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Are you making the right moves to save for retirement? In addition to signing up for your plan, you need to periodically consider increasing contributions and checking your asset allocation while you are still working and saving. According to a TIAA-CREF survey, many savers in a workplace retirement plan miss out on these three important steps toward saving enough for retirement: enroll, increase and rebalance.1

Enroll in your retirement savings plan

Starting a new job can be a busy time, and as a result you may let signing up for your retirement plan fall to the bottom of your to-do list. In fact, 37% of those surveyed who were not automatically enrolled in their retirement plan by their employer waited six months or longer to enroll.

But if you postpone saving in your retirement plan, it can cost you in the long run. The money you save today can be worth many times your original savings in the future, thanks to compound interest. For example, consider a 30-year-old woman who earns $50,000 per year in a new job. If she begins saving 6% of her pay, or $250 per month, in her workplace retirement plan as soon as she starts the job and continues until she leaves the position five years later, that savings could be worth about $100,000 in 30 years.

But what if she postpones saving in her plan? If she waits just two years to begin saving in her retirement plan, that same $250 a month will grow to only $56,622 (see Exhibit 1).2

Waiting to save can cost you money

Also, not saving for retirement through your workplace plan means you may be missing out on matching funds from your employer, meaning you are essentially turning down free money. Need help getting started with your retirement plan? Speak to your benefits office for help.

Increase your retirement contributions

What if you’re already participating in your workplace plan? Ask yourself whether you’re saving as much as you can. Currently you can set aside up to $17,500 a year into your 403(b) or 401(k) workplace plan, or up to $23,000 if you are 50 or over.

If your salary has risen over the years, have you also set aside more money for retirement? More than one-third of survey respondents (36%) have never increased the percentage of their salary that they’re saving for retirement.

Ideally, you should aim to save 10-15% of your current annual income toward retirement, including both your own contributions and any matching funds from your employer. Getting a raise? That can be a good time to bump up your retirement savings as well — though only 43% of survey respondents increased their savings after their last raise.

Note that some savings plans allow you to save a fixed dollar amount rather than a percentage of your salary. If you save a specific dollar amount, be sure to revisit annually how much you are saving, since that dollar amount won’t increase as your salary does.

Rebalance your retirement savings

In addition to signing up and saving, it’s important to have the right mix of investments. After ensuring you are saving enough money, making sure your nest egg is properly diversified may be the second-most important variable in retiring comfortably.

When you enrolled in your plan, you probably chose an asset allocation, or division of your savings among stocks, bonds, real estate and other options, based on variables including your age and how much investment risk you were willing to take.  Over the years, however, your circumstances will likely change and your asset allocation may no longer be the best for your current situation. If you invest too conservatively, your money may grow in value too slowly to keep pace with inflation.

On the other hand, as you’re approaching retirement you may want to shift your asset allocation to less volatile assets to help insulate your nest egg from stock market volatility. Also, as you near retirement, consider how your savings, anticipated Social Security benefits and any pension payments will help you cover your fixed costs after you no longer draw a paycheck. Investing in a fixed annuity, even when you are still working, can help cover the gap between your expenses and sources of income when you are retired.

Regardless of your age, it’s important to review your asset allocation annually. Moves in the market may mean your original asset allocation has now shifted. For example, if at the beginning of 2009 you opened a retirement plan and divided your savings 50-50 between stocks and bonds, today you likely have more than 50% of your money invested in stocks because equities have risen more in value than bonds during that time. That may mean more of your money may now be  invested in stocks than you prefer.

TIAA-CREF’s Retirement Advisor can help by offering a target mix of appropriate assets, with specific fund recommendations if you are a TIAA-CREF participant. You can also talk to your advisor about the right investments for your unique situation. To cope with swings in the market, have your savings automatically rebalanced every year on your birthday, if your plan offers the option.

Make the right moves for retirement

Don’t forget to check up on your retirement. Your TIAA-CREF advisor can help you decide on the best moves to help secure your future.

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