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
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
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.
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.
1The survey was conducted online by KRC Research, a third-party research firm, among a national random sample of 1,000 adults contributing to a 401(k), 403(b) or defined benefit plan. Data was weighted by key demographic variables to ensure that the sample reflects the national population distribution.
2These figures are purely hypothetical and are not intended to predict or project returns.
Rebalancing does not protect against losses or guarantee that an investor’s goal will be met.
The purpose of TIAA-CREF’s Retirement Advisor is to show how the performance of the underlying investment accounts could affect a participant's policy cash value and the resulting retirement income. Projections and other information generated through the Retirement Advisor regarding the likelihood of various Investment outcomes are hypothetical, do not reflect actual investment results and are not a guarantee of future results. The projections are dependent in part on subjective assumptions, including the rate of inflation and the rate of return for different asset classes. These rates are difficult to accurately predict. Changes to the law, financial markets or your personal circumstances can cause substantial deviation from the estimates. This could result in declines in the accounts value over short or even extended periods of time.
The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons. Past performance does not guarantee future results.
TIAA-CREF does not and cannot provide tax or legal advice. Please consult with your own advisors.
Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not deposits, are not insured by any federal government agency, are not a condition to any banking service or activity, and may lose value.
TIAA-CREF Individual & Institutional Services, LLC, Teachers Personal Investors Services, Inc., and Nuveen Securities, LLC, Members FINRA and SIPC, distribute securities products.
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