Get Five Retirement Savings Benefits with Zero Effort
You may have heard that "90% of success is just showing up". For retirement saving, just by participating in your company’s retirement plan you are "showing up" - and setting yourself on the path to success. Here are five ways that your retirement plan automatically works for you:
1. Built-in Savings Discipline
We all know that saving is the right thing to do, but it usually takes some effort - which means we often don’t follow through. That’s why automatic retirement plan contributions are such a boon. With your company’s retirement plan, you don’t have to remember to set aside the money each month or write and mail a check - it’s all taken care of for you. (You can extend this benefit by setting up an automatic investment plan for your personal Individual Retirement Account (IRA), too; ask your IRA custodian for details.)
2. No Guesswork
Regular, automatic retirement plan contributions also eliminate the burden of deciding when to invest. Is the market headed up? Down? Would next month be a better time to buy? Rather than test your crystal ball, simply make regular contributions. Over time, dollar-cost averaging - investing the same amount regardless of current market conditions - may lower your average cost per share and reduce the possibility of investing all your money at market peaks.*
3. Reduced Income Taxes
To receive some income tax benefits, you must complete complex worksheets and arcane schedules on your annual income tax return. Not so with your retirement plan! Any salary deferrals you make into your retirement account are not reported as income to the Internal Revenue Service.1 You’ll automatically pay less in current income taxes, no extra paperwork required.
4. Deferred Taxes on Investment Growth
You do not pay taxes on investment income as long as the assets remain in a company-sponsored retirement plan or IRA.1 This helps your retirement assets grow faster than they would in a regular, taxable account. All you have to do to receive this powerful tax benefit is leave your money in the retirement account until you’ve reached retirement age under the IRS rules - what could be easier?
5. Target-Date Asset Allocation
Many company retirement plans offer investment options that automatically allocate your assets based on your time remaining until retirement, and automatically adjust this allocation over time as your goal draws closer. Consider taking advantage of this type of tool. Once you make your initial selection, the rest of the work is in the hands of investment professionals. Remember, diversification does not ensure a profit or protect against loss in a declining market.
One Thing Depends on You: Showing Up
These five benefits can make building your retirement nest egg much easier. But you have to keep 'showing up' - keep participating in your company’s retirement plan and keep saving as much as you can. Making this commitment to save is the first step on the way to a successful retirement.
